U.S. Dollar Hits 3-Month Low Vs. Euro Following Weak Economic Data, Speculation About Fed Rate Hikes

While stock markets and commodities rebounded on Wednesday, the U.S. Dollar was declining on speculation about the Fed putting interest rate increases on hold – prompted by declarations from New York Fed President William Dudley. In this context, the U.S. currency hit its lowest point versus the Euro since last October.

"Indications that the Fed will hold off on raising interest rates typically have an adverse impact on the dollar. Higher rates make currencies more attractive to investors by increasing the return on deposits held in those currencies," MarketWatch said.

Over the day, the dollar lost more than 1.5 percent versus the euro, and over 1.7 percent against the Japanese yen – losing most of the ground gained on Friday after the country’s central bank introduced negative interest rates.

Related Link: Tech Industry To See 330K Layoffs In 2016, Chowdhry Warns

Jim Paulsen, chief investment officer at Wells Capital Management took a look into the slower-than-expected expansion figures for the U.S. economy’s service sector, which were in part responsible for the decline of the dollar on Wednesday, and explained: "There is ongoing concern reflected in the market today, and maybe yesterday, about the slowdown in the manufacturing sector spreading to the consumer side of the economy."

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.