Forex - US dollar struggles near 13-month trough

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Investing.com - The U.S. dollar was trading near 13-month lows against currency basket on Monday, pressured lower by investor concerns over deepening U.S. political uncertainty and doubts over whether the Federal Reserve will raise interest rates again this year.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was at 93.17 by 10.20 a.m. ET (02.20 p.m. GMT), after ending Friday's session down around 0.6%.

The index has fallen around 2.2% so far this month and is down around 9% for the year to date.

The dollar remained on the back foot after data on Friday showing that while U.S. economic growth accelerated in the second quarter wage growth and inflation remained sluggish.

The subdued inflation outlook has raised doubts over whether the Fed will be able to stick to plans for a third interest rate hike this year.

The dollar had been supported by the Fed's gradual policy tightening since late 2015 but the prospect that other major central banks may join it in tightening monetary policy has fed into recent dollar weakness.

Declining expectations for tax reforms and fiscal stimulus under the Trump administration have also weighed on the dollar.

Hopes that the Trump administration will be able to push through its economic agenda received another setback on Friday after the U.S. Senate failed to dismantle Obamacare.

Speaking Monday, Fed Vice Chair Stanley Fischer said U.S. companies are likely holding back on investing in their businesses due to an uncertain outlook for government policies.

The dollar showed little reaction to data showing that U.S. pending home sales rebounded in June after three months of declines.

The dollar was weaker against the yen, with USD/JPY at 110.47, not far from the one-and-a-half month low of 110.31 hit overnight.

The euro was steady, with EUR/USD at 1.1752, close to 1.1777, its strongest level since January 2015 set on Thursday.

In the euro zone, data on Monday showed that headline inflation rose in line with forecasts in July, but underlying inflation rose to the highest in four years, giving the European Central Bank more leeway to begin scaling back its stimulus program in the autumn.

A separate report showed that the unemployment rate in the euro area ticked down to 9.1% in June from 9.2% in May, its lowest level since February 2009.

Sterling was almost unchanged with GBP/USD at 1.3136, still within striking distance of the 10-month high of 1.3158 set on Thursday.

The Canadian dollar was weaker, with USD/CAD advancing 0.47% to 1.2490. The loonie rallied on Friday after stronger than expected economic growth data underlined expectations for another rate hike by the Bank of Canada in the coming months.

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