The US dollar survived a third week of a summer onslaught, but it is hardly in the clear yet.
The currency recovered from a seven-month low against the euro this week, rising against most of its major peers, as a global stock selloff eased and data showed the US economy gaining momentum.
US Federal Reserve policymakers offered varying views on whether financial-market volatility could deter the central bank from raising interest rates for the first time in almost a decade. Officials emphasized that data in the next two weeks, including this month’s nonfarm payroll report on Friday, will show whether the economy is ready for higher rates.
The dollar’s rise “is consistent with what we’ve been seeing out of the US economy,” Lennon Sweeting, a Toronto-based dealer at the broker and payment provider USForex Inc, said by telephone. “The big thing is there’s a lot of new information available to the Fed that wasn’t available back in July. It’ll be interesting to see whether they’re taking a step back on a rate hike.”
The greenback climbed 1.8 percent to US$1.1185 against the euro this week, after plummeting on Monday to the lowest since January. The Bloomberg Dollar Spot Index gained 0.7 percent to 1,207.64, the first weekly advance since China unexpectedly devalued the yuan on Aug. 11, triggering a global equity rout as volatility roiled markets.
The yen advanced to ¥116.18 per US dollar on Monday, its strongest level since Jan. 16. The yen has since wiped out some of those gains, reaching ¥121.25 as of 12:21pm in New York on Friday. It hit a 13-year low of ¥125.86 as recently as June 5, with option markets putting the probability of returning to that level this year at about 40 percent.
Traders have increased to 59 percent the probability the US Federal Reserve will raise interest rates by or at its December meeting from as low as 46 percent on Tuesday. The odds for an increase at next month’s meeting were 38 percent. The calculation is based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase.
The world’s biggest economy continued to add jobs this month and the jobless rate fell to 5.2 percent, according to the median estimate in a Bloomberg survey of economists.
Gains in average hourly earnings remain small, indicating little pressure on wage growth that will translate into higher inflation.
The British pound dropped for a fourth week against the euro, its longest losing streak in more than two years, as a report showed UK economic growth slowed in the second quarter.
Sterling fell the most since March versus the dollar this week.
The UK’s GDP grew by 2.6 percent in the 12 months through June, in line with the median forecast of economists in a Bloomberg survey. That compared with 2.9 percent growth in the period ended in March. Britain’s currency declined versus most of its G10 peers on Friday.
The pound strengthened 0.2 percent to £0.7286 per euro as of 4:43pm London time, paring its weekly drop to 0.4 percent. Its four-week decline is the longest run since July 2013. Sterling fell 0.3 percent to US$1.5356 on Friday, extending this week’s slide to 2.2 percent, the most since March 6. It reached a two-month high of US$1.5819 on Tuesday.
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