The dollar fell slightly on Friday en route to a second straight weekly decline as traders lowered expectations of interest rate hikes from the U.S. Federal Reserve and improving inflation and consumer spending data soothed investors. recession fears.
The dollar index, which measures the safe-haven currency against a basket of six other major currencies, fell to 101.43, its weakest since April 25. On a weekly basis, it fell 1.24%, after falling 1.45% the previous one. the week. As of 3:10 p.m. Eastern Time (1910 GMT), the dollar was down 0.059% at 101.66.
“We continue to believe that the best of the broader USD rally is now behind us and while the USD is not yet significantly lower, further gains appear unlikely,” Bank strategists said. Scotia in a client note.
“The Fed is fully priced and expectations for rate hikes later in the year could be subject to revision if the economy slows faster than expected,” they said.
The greenback hit a nearly two-decade high above 105 earlier this month, but declined alongside prospects for the magnitude of likely Fed rate hikes this year, which were fueled by partly by fears of galloping inflation.
“The dollar is losing altitude as the idea of the Fed suspending rate hikes in the fall gains traction,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
Minutes from the Fed’s May meeting this week showed most participants thought 50 basis point hikes would be appropriate at policy meetings in June and July, but many thought big early hikes would do the trick. a break later in the year to assess whether tighter policy is helping to control inflation.
Although inflation continued to rise in April, it rose less than in recent months, data showed on Friday. The personal consumption expenditure (PCE) price index rose 0.2%, the smallest gain since November 2020, after rising 0.9% in March. For the 12 months to April, the PCE price index rose 6.3% after jumping 6.6% in March.
Benchmark U.S. Treasury yields were lower on Friday but briefly rebounded from session lows after the April inflation data, bolstering hopes that the worst of the spike in pressures on the prices went up.
A separate report showed that consumer spending in the United States rose more than expected last month as households increased their purchases of goods and services.
The key US report next week will be the nonfarm payrolls numbers for May at the end of the week.
“Jobs data will illuminate the scope of the tightening from the third quarter onwards,” Manimbo said.
The euro has been the biggest beneficiary of the weaker dollar, but that momentum has also waned as investors believe much of the European Central Bank’s expected rate hikes have been priced in at current levels.
The single currency remained stable for the day at $1.0731, after hitting its highest levels in a month. The British pound was up 0.16% at $1.2628.
The risk-sensitive Australian dollar gained 0.8% to $0.7156, while the New Zealand dollar jumped 0.88% to $0.6535.
Better risk sentiment didn’t help bitcoin, however, which was 2.59% lower at $28,426, continuing this week’s gradual decline from the psychologically important $30,000 level.