Dollar skids as Brexit optimism lifts pound and euro

US dollars and other world currencies lie in a charity receptacle at Pearson international airport in Toronto June 13, 2018. — Reuters pic
US dollars and other world currencies lie in a charity receptacle at Pearson international airport in Toronto June 13, 2018. — Reuters pic

NEW YORK, Oct 21 — The dollar was crawling toward its worst month since 2018 today as intermittent waves of Brexit optimism pushed the pound to a 5-1/2 month high and kept the euro’s bumper October intact.

Although Prime Minister Boris Johnson this weekend was forced by his opponents to send a letter to Brussels seeking a delay to Britain’s departure from the European Union as UK lawmakers delayed a vote on a reworked Brexit deal, the currency market reflected tentative hopes that it would eventually be passed. Johnson will again try to put his Brexit deal to a vote in parliament on Monday.

Against the dollar, sterling was last up 0.1 per cent in North American trade, having earlier broken above US$1.30 for the first time in 5-1/2 months. The euro was 0.18 per cent higher against the dollar, having also been lifted by Brexit optimism this month by 2.23 per cent.

“Brexit has been doing a lot of the hard work in terms of moving things around,” said Daniel Katzive, head of foreign exchange strategy for North at BNP Paribas in New York.



“Whereas the impact of Brexit on sterling is obvious, euro-USD’s response to diminished Brexit fears has probably been larger than what we had expected. This suggests that a lot of the weakness in the euro over the previous few months was being driven by Brexit concerns and as those are reducing, we’re seeing the euro get closer to where we think where it should have been all along based on rate differentials.”

The dollar is down 2.1 per cent this month against a basket of six rival currencies which, if it stays that way, would be its worst month since January 2018.

It hovered at US$1.115 per euro on Monday but managed to claw up to 108.52 against the safe-haven Japanese yen. The yen has been weak too, having hit a 2-1/2-month low last week.

The dollar has also been falling against a backdrop of weaker US data including disappointing retail sales which fell for the first time in seven months in September as households cut spending on vehicles, building materials, hobbies and online purchases.

“There are definitely some warning signs on the US data front, which I think is also impacting the dollar,” said Katzive. — Reuters

Source: The Malay Mail Online





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