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Dollar Extends Weakness

The U.S. dollar stayed weak on Thursday, losing ground for a second successive session on expectations the Federal Reserve will cut interest rate later this month.

Worries about weak housing market data and continued uncertainty about U.S.-China trade negotiations weighed on the currency.

Rate cut hopes increased after New York Federal Reserve President John Williams said today that Fed would cut rate in the upcoming monetary policy meeting. He said the bank will have to act quickly and forcefully as economic growth is slowing.

Federal Reserve Chair Jerome Powell has been frequently criticized by President Donald Trump for not cutting down rates. Powell has not yielded to pressure from White House, but of late he has been saying the central bank will "act as appropriate" to support economic expansion.

A rate cut later this month appears very much on the cards although the quantum of cut has been subject to debates with one section of the analysts hoping for a 25-basis points cut this month and two more cuts before the end of this year, while another calls for a much steeper cut in rates this month itself.

The dollar index declined to 96.67, losing about 0.55% in the process, after having advanced slightly in early trades to 97.26.

Against the euro, the dollar was down more than 0.4%, at 1.1275. Against Pound Sterling, the greenback weakened to 1.2559 before recovering slightly to 1.2547, but was still down more than 0.9% from previous close.

UK retail sales recovered unexpectedly in June, data from the Office for National Statistics showed Thursday.

Retail sales volume increased 1% month-on-month in June largely driven by non-food product sales. On a yearly basis, growth in retail sales accelerated to 3.8% from 2.2% in May. The rate also exceeded the expected rate of 2.6%.

The Japanese currency strengthened to 107.22 a dollar, gaining about 0.65%. The yen had closed at 107.94 a dollar on Wednesday.

The dollar lost 0.2% and 0.6%, respectively against the loonie and Swiss franc, with the respective pairs trading at 1.3026 and 0.9817.

Against the Aussie, the dollar was down 0.9%. The AUD-USD was last seen quoting at 0.7074.

Data released by the Labor Department showed first-time claims for U.S. unemployment benefits increased in line with economist estimates in the week ended July 13th.

The report said initial jobless claims inched up to 216,000, an increase of 8,000 from the previous week's revised level of 208,000. Economists had expected jobless claims to creep up to 216,000 from the 209,000 originally reported for the previous week.

A report from the Federal Reserve Bank of Philadelphia said its diffusion index for current general activity surged up to 21.8 in July after tumbling to 0.3 in June, with a positive reading indicating growth in regional manufacturing Activity. Economists had expected the index to rise to 5.0.

The Conference Board's report said its leading economic index fell by 0.3% in June after coming in unchanged in May. The drop surprised economists, who had expected the index to inch up by 0.1 percent.

"As the US economy enters its eleventh year of expansion, the longest in US history, the LEI suggests growth is likely to remain slow in the second half of the year," said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board.

The unexpected drop by the leading economic index reflected negative contributions from building permits, the ISM New Orders Index, and average weekly initial jobless claims.

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