U.S. Markets

Dollar slips after U.S. data dampens Fed rate hike bets

NEW YORK (Reuters) - The U.S. dollar fell against the euro, yen, and franc on Thursday after U.S. economic data showed weakness in business spending plans, denting expectations for a Federal Reserve interest rate increase in June or July.

United States one dollar bills are seen on a light table at the Bureau of Engraving and Printing in Washington in this November 14, 2014, file photo. REUTERS/Gary Cameron/Files

The Commerce Department said orders for long-lasting U.S. manufactured goods surged 3.4 percent last month after increasing 1.9 percent in March. Economists polled by Reuters had forecast durable goods orders rising only 0.5 percent last month.

But non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 0.8 percent after slipping 0.1 percent in the prior month. These so-called core capital goods orders have declined for three consecutive months. [nL2N18N0FD]

Doubts still remain about the likelihood of a June or July Fed rate increase, said Boris Schlossberg, managing director at BK Asset Management in New York.

The U.S. dollar index, which measures the greenback against a basket of six major rivals, hit 94.938, its lowest level in eight days .DXY. The euro rose more than half a percentage point to a session high of $1.1216, rebounding from Wednesday's 10-week low of $1.1126.

The dollar hit its lowest level in a week against the Swiss franc, at 0.9873 franc CHF=. The dollar was last down 0.44 percent at 109.70 Japanese yen after hitting a session low of 109.42 yen early in the session JPY=.

Fed funds futures contracts on Thursday implied traders saw a 26 percent chance the U.S. central bank would raise rates in June, down from 32 percent on Wednesday.

“The market is scaling back some of its confidence in a June or July rate hike,” said Daniel Katzive, head of FX strategy for North America at BNP Paribas in New York.

The dollar’s losses on Thursday reduced its gains since May 18, when minutes from the Fed’s April policy meeting signaled the central bank had edged closer to a rate increase in the near term. [nL2N18F21S]

Remarks from Fed officials on Thursday and earlier this week also supported bets for a rate rise in June or July. [nL2N18N185][nL3N18N3UP]

The dollar index remains about 0.7 percent higher since the release of the Fed minutes.

Investors were awaiting comments from Fed Chair Janet Yellen on Friday.

BK’s Schlossberg said Yellen would likely take a neutral stance in order to keep the central bank’s options open.

“She will be extraordinarily sensitive to not promise anything that she can’t deliver,” he said.

Reporting by Sam Forgione; Editing by Paul Simao and Richard Chang