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The greenback had already fallen sharply on Friday, after U.S.
Federal Reserve Janet Yellen failed to mention monetary policy
at the closely watched Jackson Hole meeting in Wyoming.
Investors saw this as evidence that Yellen was comfortable with
their rate hike expectations - currently only one is priced in
by the end of next year.
The euro, meanwhile, climbed to a 2-1/2-year high close to $1.20
<EUR=>, extending gains made at the end of last week after
European Central Bank President Mario Draghi held back from
talking down the buoyant currency at the same meeting.
The dollar index <.DXY> - which measures the U.S. currency
against six major rivals with the euro given the heaviest
weighting – was down 0.3 percent by 1200 GMT at 92.501, having
earlier fallen to as low as 92.372, its weakest since early May
2016.
“Markets will be closely watching the damage from Harvey and its
effect on the U.S. economy,” wrote FXPro analysts in a note to
clients, pointing out that Hurricane Katrina had in 2005 halved
U.S. economic growth in the quarter that followed.
A public holiday in global foreign exchange capital London kept
the market subdued, with most currencies trading in narrow
ranges.
By 1200 GMT, the euro was up just 0.1 percent at $1.1924 <EUR=>,
having touched $1.19665 in Asian trade, its highest since
January 2015. It was on track for a sixth straight month of
gains against the dollar – its best run in five years.
“This is about what (Draghi) did not say,” said Commerzbank
currency strategist Esther Reichelt, in Frankfurt. “He does not
seem to be overly concerned with the current euro levels, which
is the market’s justification to move the euro higher.”
The euro was broadly expected to remain firm, at least in the
short term, with investor focus on the ECB and whether it
announces plans to reduce debt-buying at its September policy
meeting next week.
The greenback slipped 0.1 percent against the safe-haven
Japanese yen to 109.30 yen, clear of the four-month low of
108.605 touched on Aug. 18.
The pound was slightly higher on the day at $1.2916, having
briefly touched a 13-day peak of $1.2946 <GBP=D3>.
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