The US dollar rose on speculation that weaker-than-forecast US economic reports will not stop the US Federal Reserve from raising interest rates next month.
The currency strengthened against most of its major peers even as US consumer purchases were less than forecast last month and wholesale prices unexpectedly declined. The greenback gained earlier versus the euro as data showed economic growth in the currency bloc unexpectedly slowed in the third quarter, boosting expectations for further monetary easing from the European Central Bank.
“With the Fed so anxious to get off zero, this isn’t a data set that’s really going to change things,” Bank of Montreal global head of foreign-exchange strategy Greg Anderson said by telephone from New York. “I expect the dollar to continue to grind a little bit higher.”
The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, rose 0.3 percent to 1,229.63 as of 5pm in New York. The measure traded near its highest since December 2004.
The euro slid 0.4 percent to US$1.0773, close to its lowest since April. The greenback was little changed versus Japan’s currency at ¥122.61.
Brazil’s real led declines against the dollar, dropping 2.1 percent, amid a report that Brazilian President Dilma Rousseff is considering replacing Brazilian Minister of Finance Joaquim Levy.
She has not yet decided when the appointment would be made, Valor Economico reported.
US policymakers are cautiously moving toward their first rate increase in almost a decade.
Fed Vice Chairman Stanley Fischer on Thursday said that it “may be appropriate” to raise borrowing costs next month, adding that the Fed’s decision to delay boosting rates has helped to offset economic headwinds caused by a stronger US dollar.
Friday’s softer-than-forecast data did little to change investors’ conviction that the Fed will indeed increase borrowing costs next month. Futures contracts signal a 66 percent chance that officials will raise rates by year-end, about the same likelihood as on Thursday. The calculations assume the benchmark will average 0.375 percent after the first increase, versus the current target range of zero to 0.25 percent.
Retail sales increased 0.1 percent after being little changed in September, US Department of Commerce figures showed.
The median forecast of 84 economists surveyed by Bloomberg called for a 0.3 percent gain.
The 0.4 percent drop in the producer-price index followed a 0.5 percent decrease in September that was the biggest in eight months, US Department of Labor figures showed.
The gauge was down 1.6 percent from the year before, the most in records back to November 2010.
“Although these numbers are lighter than expected, they won’t derail the Fed next month,” said Joe Manimbo, an analyst with Western Union Business Solutions, a unit of Western Union Co, in Washington. “The dollar looks set for a period of consolidation, given that it’s enjoyed robust gains over a short period of time.”
The British pound posted its biggest weekly advance versus the dollar in two months. It touched its strongest level since August against the euro after European Central Bank President Mario Draghi on Thursday kept the prospects of more stimulus alive in the face of low inflation and faltering economic growth.
The pound appreciated 1.2 percent this week to £0.7051 per euro as of 5:13pm London time on Friday. Sterling rose 1 percent to US$1.5211, the biggest weekly gain versus the dollar since Sept. 11.
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