NEW YORK, Dec 7 (Reuters) – The U.S. dollar weakened against major currencies on Wednesday amid concerns that rising interest rates could push the U.S. economy into recession, while a loosening of China’s COVID restrictions boosted the yuan.
The Peruvian sol fell as the country’s Congress voted to oust President Pedro Castillo in an impeachment trial on Wednesday. At its session low, the sol fell more than 2% against the dollar. [nL1N32X1U2]
Some investors have been anticipating the Fed will soon slow its rate tightening pace, but recent upbeat U.S. employment, services and factory data has added to investor uncertainty over the Fed’s policy outlook. The Fed is expected to raise rates again when it meets next week.
A U.S. dollar index , which measures the greenback against a basket of currencies, was last down 0.4%.
Several U.S. bank executives are bracing for a worsening U.S. economy next year. Among them, Bank of America CEO Brian Moynihan told investors at a Goldman Sachs financial conference that the bank’s research shows “negative growth” in the first part of 2023, but the contraction will be “mild.” read more
One view is that “recessionary worries are going to drive the Fed to pause. This is why the dollar is weakening here,” said Edward Moya at OANDA in New York. “Surging interest rates have been the primary driver for dollar strength over the last year.”
Against the dollar, the euro was up 0.3% at $1.0507. The euro has risen recently on signs that Europe’s economic downturn may be less bad than previously feared.
The dollar was down 0.5% against the Japanese yen .
The U.S. dollar was unchanged against the Canadian dollar . The Bank of Canada hiked its benchmark overnight interest rate by 50 basis points to 4.25%, the highest level in almost 15 years, and signaled the tightening campaign was near an end. read more
In Asia, China’s yuan was firmer as the government earlier announced measures that marked a sharp change to its tough zero-COVID policy that has battered its economy and triggered historic protests.
China’s national health authority said asymptomatic COVID-19 cases and those with mild symptoms can self-treat while in quarantine at home.
The announcement was the strongest sign so far that China is preparing its people to live with the disease, though analysts say the path to fully reopening the economy will be long and bumpy.
The dollar was last down 0.3% against the offshore Chinese yuan .
In cryptocurrencies, bitcoin last was down 1.5%.
Currency bid prices at 3:39PM (2039 GMT)
Additional reporting by Rae Wee and Harry Robertson, Editing by Sam Holmes, Kim Coghill, Arun Koyyur and Diane Craft
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