US Dollar extends slump on report of US vessel seizure
London (Apr 28) The dollar traded lower on Tuesday after reports that the Maersk Tigris, a Marshall Island-flagged cargo ship was in Iranian territorial waters as it prepared to enter the Strait of Hormuz.
Iranian Revolutionary Guard patrol boards ordered the ship to halt, then fired shots across the ships bow forcing it to a halt, NBC News said. They then boarded and now control the vessel, not permitting the vessel to leave.
A U.S. Navy destroyer, the Farragut was headed in that direction and is now in the area, per NBC News. U.S. Navy war planes are also in the air observing the situation.
The dollar index, which measures the greenback against a basket of major currencies, fell to 96.23, or 0.55 percent from 96.36.
The euro extended its gains against the greenback to $1.0986, up 1.02 percent, from $1.0967.
Investors also eyed a U.S. Federal Reserve meeting starting later in the day that could offer clues as to whether bets on an interest rate hike in the coming months are justified.
Worries that the U.S. economy is stalling, following a run of weaker-than-expected data, have seen the dollar lose around 4 percent in the past six weeks as expectations of an interest rate rise in June have faded. But many still expect the Fed to lift rates in September.
U.S. consumer confidence for April came in at 95.2, below the expected 102.5, while the S&P/Case-Shiller's 20-City Composite gained 5 percent year-over-year in February, compared with a 4.5 percent increase in January.
"There's been disappointment with the U.S. data - that's clear, and that's feeding into the dollar price action," said Phyllis Papadavid, senior global FX strategist at BNP Paribas in London. "But people are in wait-and-see mode ahead of the Fed."
Benefiting from the dollar's weakness, the euro gained 0.83 percent to $1.0967 after U.S. consumer confidence data for April was released.
The euro was also boosted by renewed hopes that cash-strapped Greece could secure extra funding. That followed the news that Prime Minister Alexis Tsipras had reshuffled his team handling talks with European and IMF lenders, effectively sidelining embattled Finance Minister Yanis Varoufakis.
Tsipras said he was confident of reaching an outline deal before a meeting of euro zone finance ministers on May 11, a day before Greece must pay 700 million euros to the IMF.
"Varoufakis's hard-ball tactics have been a source of huge frustration for the Brussels group of international creditors," said Ray Attrill, global co-head of FX strategy at NAB.
"The appointment of a more conventional negotiator, more familiar with the European bureaucracy, has stoked optimism that a deal will be reached before large payments are due in May."
The Swiss franc, meanwhile, fell to of 1.0457 against the euro, with traders speculating the Swiss National Bank was intervening to weaken the currency.
Source: CNBC
