Dollar dented as data disappoints; sterling soars

A stack of British one pound sterling coins stand in front of a British Union flag in this arranged photograph in the United Kingdom, on June 13, 2016.
Jason Alden | Bloomberg | Getty Images

The U.S. dollar fell across the board on Wednesday after dismal U.S. retail sales data painted a gloomy picture of the economy and supported the case for further interest rate cuts by the Federal Reserve.

The dollar index, which measures the U.S. currency against six major currencies, was down 0.1% at 98.188.

U.S. retail sales fell for the first time in seven months in September, suggesting that manufacturing-led weakness could be spreading to the broader economy.

"The U.S. economy is indeed revealing further weaknesses, justifying another rate cut by the Fed," Marc-André Fongern, a strategist at MAF Global Forex in Frankfurt, said.

With two weeks to go until their next policy meeting, U.S. central bankers remain divided about the need to cut borrowing costs for a third time this year.

"If the consumer shows stronger signs of weakness, we could easily see the Fed commit to an easing cycle," Edward Moya, a senior market analyst at OANDA in New York, said in a note.

The dollar's losses were most pronounced against other safe-haven currencies such as the yen and the Swiss franc.

Against the yen, the greenback fell 0.1%, while it slipped 0.18% against the Swiss franc.

Lingering worries about trade tensions between the United States and China have kept investors' risk appetite in check.

Reports of a partial trade deal between the world's two largest economies last week initially cheered markets, but a lack of details on the agreement has since curbed any enthusiasm.

"A significant depreciation of the U.S. dollar would only be conceivable in the event of a credible partial deal between the United States and China," Fongern said.

Increased trade tensions between Washington and Beijing have generally been supportive of the dollar as investors view the United States to be in better shape than its rivals to weather a trade war.

China's onshore spot yuan ended the domestic session at 7.1030 per dollar, the weakest such close since Oct. 10, after Beijing criticized new U.S. legislation backing pro-democracy protests in Hong Kong.

Elsewhere, the Norwegian crown weakened to its lowest since July 2001 at 9.119 per dollar. Norway, a major exporter of oil, is particularly sensitive to economic tensions.

Trade-oriented currencies such as the Australian dollar and the New Zealand dollar also weakened. The kiwi was down 0.64%.

Sterling swung around five-month highs amid a blizzard of contradictory headlines about whether Britain and the European Union were on the verge of agreeing a Brexit deal.

The pound was last up 0.27% against the greenback.