Dollar on back foot despite Fed signal on rate hikes

LONDON — The dollar stumbled on Thursday despite mounting expectations that the Federal Reserve (Fed) will speed up interest rate hikes this year, dealers said.

After Janet Yellen's final meeting as Fed governor, the US central bank's policy board said on Wednesday that while the nation's inflation remains below target, it expects it to move up this year.

The Fed's comments provided a partial boost for the dollar, although it stumbled during European trading hours.

"The dollar did not get the lift we expected from the Fed monetary policy meeting yesterday," said ADS Securities analyst Konstantinos Anthis on Thursday.

"Even though the central bank made it clear that they see inflation moving higher this year the US currency failed to capitalise on this news."

The greenback is still under pressure against most of its peers as central banks around the world look to tighten monetary policy more in line with the US.

'Unloved' 

"It's remarkable how the Dollar remains depressed and unloved, despite the Federal Reserve expressing optimism over increased inflationary pressures as the year moves on," said Lukman Otunuga at FXTM online currency trading brokerage. 

European stock markets slid after a mixed performance across Asia, with Frankfurt's DAX slumping 1.4 per cent.

London was hampered by a strong pound, which tends to weigh on the share prices of multinationals that earn in currencies other than sterling.

The pound rose on Thursday against major rivals as dealers shrugged off news of slowing UK manufacturing growth in January.

The FTSE was also dented by telecoms giant Vodafone, which announced a drop in revenue during its third quarter — sending its share price sliding 4.5 per cent.

Royal Dutch Shell dropped 1.7 per cent, despite the energy major announcing that 2017 net profits more than doubled on recovering oil prices.

Wall Street opened lower, with the Dow dropping 0.4 per cent in the first moments of trading.

In Asia, Tokyo's main stocks index jumped almost 2 per cent on a weaker yen and bargain-buying following a six-day losing streak.