Item 1 of 4 U.S. Dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration/File Photo
NEW YORK, Aug 1 (Reuters) – The dollar gained on Thursday as rising geopolitical tensions drove a safe-haven boost, while the British pound fell after the Bank of England cut interest rates from a 16-year high.
“We are looking at the threat of outright conflict breaking out in the Middle East,” said Karl Schamotta, chief market strategist at Corpay in Toronto. “That is supporting the dollar’s safe-haven appeal.”
The dollar also bounced as a selloff on Wednesday following dovish comments by Federal Reserve Chair Jerome Powell at the conclusion of the U.S. central bank’s two-day meeting was seen as possibly overdone.
“Although Jerome Powell was extremely dovish in the press conference, the statement released by the Federal Open Market Committee really sounded more balanced,” said Schamotta.
Traders are now fully pricing in three 25-basis-point rate cuts by year-end, indicating one cut at each of the Fed’s September, November and December meetings.
The dollar index was last up 0.35% at 104.41.
Governor Andrew Bailey led the 5-4 decision to reduce rates by a quarter-point to 5%, and he said the BoE would move cautiously going forward.
“If you look at the headlines that Bailey produced: caution on cutting too quickly or by too much, it implies to me that they’re looking at sort of a steady quarterly pace of reductions,” said Colin Asher, economist at Mizuho.
The euro touched a three-week low of $1.07775 and was last down 0.36% at $1.07865.
The yen has gained since hitting a 38-year low of 161.96 against the dollar on July 3, boosted by interventions by Japanese authorities and by traders unwinding carry trades in which they were short the yen and long U.S. dollar assets.
The dollar was last down 0.21% at 149.65 yen . It earlier reached 148.51, the lowest since March 15.
In cryptocurrencies, bitcoin fell 2.68% to $62,848.
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Reporting by Karen Brettell; Additional reporting by Harry Robertson, Sruthi Shankar and Ankur Banerjee; Editing by Emelia Sithole-Matarise and Leslie Adler
Our Standards: The Thomson Reuters Trust Principles.
