The dollar licks the wounds after data fans rely on the Fed

TOKYO (Reuters) – The dollar licked its wounds on Monday after US statistics rose, the Federal Reserve will cut rates later this year while the pound has capped nearly nine months in the hope of A delay in the UK's exit from the European Union.

The dollar index against a basket of six major currencies stood at 96,564 dollars, after losing 0.81% last week, the biggest loss since the end of August.

US economic data below expectations released on Friday reinforced expectations that the Fed could adopt an accommodative stance this week, pushing US yields down to 10-week lows.

US manufacturing output fell 0.4% in February, which slowed for a second consecutive month, while mill activity in New York State was weaker than expected this month with index of 3.7.

The yield on 10-year Treasury bills fell to 2.580%, its lowest level since January 4, while futures on federal funds projected a rate reduction of about 40% this year, against nearly from zero to the beginning of the month.

"The 10-year rate closed below 2.6%, for the second time this year, after being below that level a day early in the year," said Chotarto Morita, chief strategist at SMBC Nikko Securities.

"It remains below this level in a sustainable manner, it will be the first time since January 2018, when yields began to rise, given expectations of accelerated growth and growth." 39, inflation following tax cuts. Yields are falling as the US economic climate calms down, "he said.

In this context, many investors are waiting for the Fed to suggest that rates will remain unchanged in the near future and unveil a plan to end its balance sheet later this year at its meeting that will be held. will finish Wednesday.

"The focus is on the dovish of the Fed. I had the impression that the markets went a little too far in the expectation of rate reductions. Such views are likely to be reversed if Fed charts show that board members are still expecting higher rates this year, "said Ayako Sera, Sumitomo Mitsui market economist. Trust Bank.

When the dollar weakened, the other major currencies rose by default. The euro traded at 1.1328 dollars, stable early Monday, after gaining 0.86%, the biggest weekly gain since the end of September.

The dollar reached 11.50 yen, down from the high of the last nine days of 111.90 on Friday.

The British pound was close to the $ 1.3380 record reached the highest in the last nine months of last week, supported by a claim that a Brexit without a transaction would probably be avoided. It was $ 1.3292.

It is not clear whether British Prime Minister Theresa May can get support for her agreement on Brexit in Parliament, which has twice rejected her bid by a wide margin.

May has only three days to get approval for her exit contract from the European Union if she wants to go to a summit with bloc leaders on Thursday.

May warns the inflexible Brexiteers that if they do not approve of her divorce agreement, the exit of England from the European Union could take a long time and imply to participate in the elections to the European Parliament.