U.S. Dollar’s Volatility Drops on Fed Rates Outlook

The dollar headed for its weakest in a month against major peers as currency volatility fell to a record amid prospects a sluggish U.S. economy will prompt the Federal Reserve to hold interest rates near zero for longer.

The greenback headed for its sharpest drop in two months against the euro this week before U.S. data economists forecast will show manufacturing activity cooled and the economy shrank. The Fed said this week it will keep interest rates at almost zero for a “considerable time.” The euro held a five-day gain against the yen before Bank of Japan Governor Haruhiko Kuroda speaks today and ahead of a report that may show consumer confidence in Europe improved. A Deutsche Bank AG gauge of currency volatility sank to a record low.

“The dollar will continue to consolidate,” said Kazuo Shirai, trader at Union Bank NA in Los Angeles. “Unless we see the next key U.S. data turn positive, this mini trend of dollar selling is here to stay.”

Bloomberg

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