US dollar bulls were dealt a fresh blow this week as another set of US economic reports sent the greenback plunging.
The dollar on Friday touched its lowest level since June after data showed retail sales unexpectedly stalled last month, while wholesale prices posted a surprise decline.
The losses capped the third straight week in which the currency reversed course amid conflicting economic signals. Last week wrapped up on a bullish note on brightening payroll data, a week after GDP figures came in much weaker than forecast.
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The latest data led traders to curb bets that the US Federal Reserve will raise interest rates in coming months, suggesting the dollar may struggle to recoup its about 4.5 percent decline this year against major peers. The market-implied likelihood of a rate hike by December fell to 42 percent, from 47 percent a week ago, leaving traders to focus on Fed Chair Janet Yellen’s appearance at Jackson Hole, Wyoming, later this month.
“I’m not sure there are many short-term dollar bulls left at the moment,” New York-based Deutsche Bank AG global co-head of foreign-exchange research Alan Ruskin said.
The data reinforce “the idea Yellen won’t send a strong tightening signal” in remarks at Jackson Hole.
The Bloomberg Dollar Spot Index, which tracks the currency against a group of major peers, fell 0.7 percent this week. It reached the lowest since June 24, when financial markets were in turmoil after the UK vote to leave the EU.
The greenback weakened 0.7 percent to US$1.1162 per euro, and by 0.5 percent to ¥101.30.
The US currency has declined this year as policymakers have held off on boosting rates again after liftoff from near zero in December last year.
Most analysts still expect the dollar to gain, as the Fed has signaled plans to raise rates gradually while other central banks add stimulus. The US currency will strengthen to US$1.08 per euro and ¥105 by year-end, according to the median forecast in a Bloomberg survey.
Hedge funds and other speculators pared futures bets on dollar gains this week, though the net position is still close to the most bullish since February, Commodity Futures Trading Commission data show.
“The markets are reacting like September is completely off the table,” New York-based Barclays PLC foreign-exchange and rates strategist Andres Jaime said.
The dollar “is going to have a hard time rallying, although we do not expect a sell-off either,” he said.
The US dollar rose against the New Taiwan dollar on Friday, gaining NT$0.077 to close at the day’s high of NT$31.403, from NT$31.57 on Friday last week, marking the second consecutive session the greenback has made a comeback, dealers said.
The gains posted by the US dollar against the NT dollar reflected the weakness of other regional currencies, while further foreign institutional buying in local equities helped to limit the losses suffered by the local currency they said.
The greenback on Friday opened at NT$31.334, and moved to a low of NT$31.315 before rebounding. Turnover totaled US$497 million during the trading session.
The US dollar extended momentum from a session earlier against the NT dollar soon after the local foreign exchange market opened, and buying continued as traders were encouraged by the comments made by a US Fed official overnight to buy into the US unit.
Speaking to the press, San Francisco Fed President John Williams said that the US central bank should hike interest rates this year, citing an improvement in the US job market.
The Fed official also said that inflation in the US market is likely to head higher, paving the path for a rate increase.
The comments prompted currency traders in the region to dump non-US dollar assets in exchange for the greenback to send the major regional currencies lower, including the South Korean won, dealers said.
A falling won, which the NT dollar tracks closely, gave an additional indication to traders here to cut their holdings in the local currency, they said.
The British pound fell for a second week as the Bank of England (BOE) restarted its stimulus program, leaving the UK currency as, once again, the year’s worst performer.
Before the BOE’s revamped bond purchases started on Monday, sterling had conceded the dubious honor of being the biggest loser among 32 major currencies to the Argentine peso as it rallied from its post-Brexit lows. The pound is now back below US$1.30 for the first time since last month as the easy money policies designed to shield the economy from the decision to quit the EU take effect.
The pound fell 1.2 percent this week to US$1.2911 as of 5:35pm London time on Friday, and weakened 1.9 percent to £0.8651 per euro. It is down more than 12 percent versus the dollar this year.
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