The dollar was down for a second week as traders adjusted their view of the Fed’s interest rate hike

Posted on

NEW YORK – The dollar fell sharply on Friday on its way to a double -weekly decline as traders lowered expectations for a U.S. Federal Reserve rate hike and increased inflation and consumer spending data eased fears of a recession.

The dollar index, which measures safe-haven currencies against traders of six other major currencies, fell to 101.43, its weakest since April 25th. week. At 3:10 pm Eastern time (1910 GMT), the dollar was down 0.059% at 101.66.

“We continue to think that the best USD rally right now is at an end and while the USD may not have fallen yet, further gains are unlikely,” a strategist from Scotiabank said in a client note.

“The Fed has fully priced in and expectations for a rate hike by the end of the year may be revised if the economy is faster than expected,” he said.

The greenback reached a nearly two -decade peak above 105 earlier this month but has declined along with outlooks for the magnitude of the possibility of a Fed interest rate hike this year, which has been supported in part by fears over runaway inflation.

“The dollar lost height as the Fed’s view of pausing rate hikes in the fall gained traction,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.

Minutes from this week’s May Fed meeting show participants generally believe a 50-basis point hike will be appropriate at June and July policy meetings, but many think the early hike will allow room to pause at the end of the year to decide what tighter policy is. help tackle inflation.

Although inflation continued to increase in April, rising less than in recent months, data showed Monday. The personal consumption price index (PCE) 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 advanced 6.3% after jumping 6.6% in March.

The U.S. Treasury benchmark yielded lower on Friday, but briefly bounced down the session after April inflation figures, which added to hopes that the worst price pressures have passed.

A separate report showed U.S. consumer spending rose more than expected last month as households increased purchases of goods and services.

The main U.S. report next week will be the nonfarm wage numbers for May over the weekend.

“The jobs data will shed some light on the scope for tightening from the third quarter going forward,” Manimbo said.

The euro has been a major recipient of the dollar’s ​​decline, but the momentum has also stalled as investors believe that the rate hike from the European Central Bank has been priced at current levels.

The single currency averaged for the day at $ 1.0731, before rising to its highest level in months. Sterling was 0.16% higher at $ 1.2628.

The risk -sensitive Australian dollar rose 0.8% to $ 0.7156, while the New Zealand dollar rose 0.88% to $ 0.6535.

Better risk sentiment didn’t help bitcoin, but it was 2.59% lower at $ 28,426, continuing a gradual decline this week from the psychologically important $ 30,000 level.

(Reporting by John McCrank; additional reporting by Saikat Chatterjee in London; editing by Susan Fenton, Kirsten Donovan and Jonathan Oatis)