The US dollar’s biggest gain in six months might run out of fuel as reports from sectors of the US economy keep pointing to sluggish growth.
The Bloomberg Dollar Spot Index that tracks the currency versus 10 peers rallied this week from a one-year low, shrugging off a patchy jobs report.
The employment data prompted Goldman Sachs Group Inc to push back its call for the US Federal Reserve’s next rate increase to September from June.
The greenback rebounded after a momentum indicator slumped to a level some analysts see as a sign the currency has moved too far, too fast and was due a reversal.
The currency might struggle to repeat its winning week as investors digest a raft of disappointing data on the economy, from manufacturing to jobs. Traders about a 50 percent likelihood of a rate increase this year, and only an 8 percent probability of a move in June, dimming the prospects for the relative allure of the dollar.
Bloomberg’s gauge of the dollar added 1.5 percent from a week earlier, climbing the most since November last year. The greenback rose 0.4 percent to US$1.1404 per euro and gained 0.6 percent to ￥107.12.
The dollar gauge’s 14-day relative strength index on Monday fell below the 30 level that indicates an extended move. It has since rebounded to 49.
Hedge funds and other large speculators boosted bets against the dollar to the highest since April 2014 as of May 3, after turning net bearish last month, US Commodity Futures Trading Commission data show.
Citigroup Inc’s economic surprise indicator — which tracks whether reports beat or miss estimates — slumped to its lowest since February on Friday, after the jobs report showed employers added fewer workers than forecast in April. That followed a lower reading on manufacturing by the Institute for Supply Management earlier in the week. GDP growth slowed to a 0.5 percent annual rate in the first quarter.
Traders scaled back expectations for rate increases in response, but perhaps too severely, according to Mike Materasso, co-chairman of the fixed-income policy committee at Franklin Templeton Investments in New York, who still expects one or two increases this year.
Materasso, a dollar bull, expects the greenback to continue to struggle in the next few weeks.
“Given the data, in the near term, it’s hard to make a case for dollar strength,” he said.
The US dollar rose against the New Taiwan dollar on Friday, gaining NT$0.035 to close at NT$32.412, from NT$32.279 on Friday last week, as traders in Taipei took cues from selling by foreign institutional investors in the local equity market, which led to fund outflows, dealers said.
Weakness in other regional currencies gave more hints to traders in the local market to pick up the US dollar, placing more downward pressure on the NT dollar thoughout the trading session, the dealers said.
It was the third consecutive session in which the US dollar moved higher against the NT dollar, with the US currency hitting a new high since April 14, when the unit closed at NT$32.436.
The greenback on Friday opened at the day’s high of NT$32.425, and moved to a low of NT$32.375 before rebounding. Turnover totaled US$797 million during the trading session.
The British pound, the developed world’s worst-performing currency this year, suffered its biggest decline in six weeks as a raft of data added to signs the economy is stagnating before a referendum that may see Britain leave the EU.
The pound fell 0.3 percent to US$1.4438 as of 5pm London time, leaving it down 1.2 percent this week, the most since March 25.
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