The dollar sank yesterday after weaker-than-expected US economic data boosted expectations the Federal Reserve would hold interest rates lower for longer, while US Treasury yields touched five-week highs as traders positioned ahead of the central bank’s policy statement.

US durable goods orders rebounded less than expected in March and a survey of American consumer confidence missed expectations, adding to a slew of weak data on the US economy in the first quarter.

Yesterday’s economic data “plays into the idea that the Fed need not be in any rush to raise rates,” said Richard Franulovich, senior currency strategist at Westpac Banking Corporation in New York.

Fed funds futures rates showed investors see no chance the Fed will raise benchmark US interest rates above the current rate of 0.25 per cent to 0.5 per cent tomorrow, and yesterday’s weaker-than-expected data pushed back odds of any rate hike in 2016, analysts said.

“It is pretty much a given that the FOMC won’t raise rates at this meeting, and may not raise rates until the end of the year,” said Kevin Giddis, head of fixed income capital markets at Raymond James in Memphis, Tennessee.

Markets see a 23 per cent chance of interest rates rising in June, according to CME Group’s FedWatch.

The US dollar index, which measures the dollar against a basket of six major currencies, fell 0.45 per cent to 94.458.

US benchmark 10-year Treasury notes slipped 7/32 in price to yield 1.925 per cent, the highest level since March 23.

World stocks were mixed, with Wall Street edging lower as investors assessed quarterly earnings and awaited the outcome of the Fed meeting.

The Dow Jones industrial average fell 14.45 points, or 0.08 per cent, to 17,962.79, the S&P 500 gained 1.52 points, or 0.07 per cent, to 2,089.31 and the Nasdaq Composite dropped 9.39 points, or 0.19 per cent, to 4,886.40.

European bourses edged higher, boosted by a smaller-than-expected 80 per cent first-quarter profit fall and unchanged dividend from BP, as well as encouraging results from pulp and paper maker UPM.

Emerging markets indexes rose along with Chinese stocks, while Japan’s Nikkei was lower on the day.

The yen was flat, as investors weighed prospects of more monetary stimulus this week from the Bank of Japan, which begins a two-day meeting today. Late last week, the Japanese currency tumbled to three-week lows on speculation the BOJ would introduce more easing measures, but analysts said those expecting aggressive monetary loosening may be disappointed.

Sterling strengthened to a 10-week high against the dollar, building on Monday’s gains as investors bet more heavily that Britons would vote to stay in the European Union at a referendum in June, following a weekend visit from US President Barack Obama who urged Britain to remain in the European Union.

“It looks as if there has been a change of sentiment,” said Esther Reichelt, an FX strategist with Commerzbank in Frankfurt.

The weaker dollar and expectations that the global oil glut would ease lifted oil prices.

Brent futures traded up 1.4 per cent at $45.10, while US crude futures gained 57 cents at $43.21 a barrel.

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