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Forex - Dollar Falls as Fed’s Clarida Says Interest Rates Near Neutral

Published 11/16/2018, 10:17 AM
Updated 11/16/2018, 10:17 AM
© Reuters. - The dollar fell on Friday after Richard Clarida, vice chairman of the Federal Reserve, said that interest rates were near neutral, but indicated that a December rate hike is still possible.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, fell 0.46% to 96.35, as of 10:17 AM ET (15:17 GMT),

Clarida told CNBC on Friday that the Fed hasn’t raised rates too far or fast but that it’s too early to know if they should increase rates too far to hold back growth.

The 2.5% to 3.5% range is considered a neutral level that doesn’t stimulate or hinder the economy, he said.

"I think certainly where the economy is today, and the Fed's projection of where it's going, that being at neutral would make sense,” Clarida said.

The Fed is expected to increase rates in December and comments from Fed Chairman Jerome Powell have increased expectations that the central bank will gradually increase rates in 2019.

Meanwhile, in a separate interview, Fed Bank of Dallas President Robert Kaplan said slowing growth in Europe and China could affect the U.S. economy.

The dollar was lower against the safe-heaven Japanese yen, with USD/JPY falling 0.76% to 112.78 In times of uncertainty, investors tend to invest in the Japanese yen, which is considered a safe asset during periods of risk aversion.

Elsewhere, GBP/USD rallied 0.63% to 1.2852 despite growing uncertainty on whether Prime Minister Theresa May would be able to pass a Brexit deal in parliament as she faces a potential leadership challenge.

EUR/USD rose 0.64% to 1.1399. The NZD/USD increased 0.31% to 0.6849, while AUD/USD increased 0.44% to 0.7309.

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