Wednesday, May 18, 2016

Forex - Euro slumps to 3-week lows against dollar

© Reuters. Euro hits 3-week lows against dollar ahead of Fed minutes© Reuters. Euro hits 3-week lows against dollar ahead of Fed minutes - The euro slid to three-week lows against the broadly stronger dollar on Wednesday on the prospect of higher U.S. interest rates, as investors looked ahead to minutes from the Federal Reserve's April meeting later in the day.

was down 0.35% at 1.1256, the weakest level since April 26.

The dollar strengthened after data showing that prompted investors to reassess the likelihood that the Fed may hike rates sooner.

rose by 0.4% in April, the biggest one-month gain since February 2013, the Labor Department said on Tuesday.

Separate reports showed that housing starts and industrial production also rose strongly last month.

The greenback received an additional boost after Fed officials said .

Dallas Fed President Robert Kaplan said Tuesday he will push for an interest-rate hike at the Fed's upcoming policy meetings.

Meanwhile, Atlanta Fed President Dennis Lockhart said he still assumes there will be two to three rate hikes before the end of this year.

San Francisco Fed President John Williams, in a joint appearance with Lockhart, echoed the remarks, saying two to three interest rate hikes this year "seems reasonable".

The minutes of the Fed's April meeting, due later Wednesday, could offer insight into the chances of a June rate hike.

In the euro zone, data on Wednesday showed that the region slid back into deflation last month, despite a rebound in energy prices, underlining the challenges facing the European Central Bank in its efforts to spur price growth.

A report by Eurostat confirmed that the slid by an annualized 0.2% in April, in line with a preliminary estimate.

The ECB targets inflation of close to, but just below 2%.

The dollar was also higher against the yen, with rising 0.25% to 109.4.

The yen initially strengthened after data showing that , before reversing gains as investors bet that more stimulus will be required to maintain momentum in the economy.

Japan's economy grew by an annualized 1.7% in the three months to March, well ahead of forecasts for a 0.2% increase and recovering from a 1.7% contraction in the previous quarter.

But private consumption, which makes up 60% of gross domestic product, rose just 0.5% after a 0.8% fall in the previous quarter.

The weak private consumption data kept alive expectations that Japanese Prime Minister Shinzo Abe may delay a planned sales tax hike next year.

The , which measures the greenback's strength against a trade-weighted basket of six major currencies, close to one-month highs at 94.84.

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