The US dollar rebounded, paring its longest slump since April, as traders weighed whether a divided US Federal Reserve would raise interest rates this year.
The greenback rose against most major counterparts on Friday, buoyed by San Francisco Fed President John Williams’ comment that September was “in play.”
The advance trimmed the Bloomberg dollar index’s first back-to-back weekly declines in four months. The remarks left the odds of a Fed hike this year at little better than a coin toss, signaling traders remain skeptical that US policy will diverge further in coming months from Japan and Europe, where central banks are adding stimulus.
“The Fed has signaled it is unwilling to let tightening expectations fall much further,” Valentin Marinov, head of G10 foreign-exchange strategy at Credit Agricole SA in London, said in a note. “Against this backdrop, the US dollar sell-off should be coming to an end.”
Bloomberg’s Dollar Spot Index, which tracks the currency against 10 peers, rose 0.4 percent as of 5pm in New York.
The US dollar strengthened 0.3 percent to ￥100.22. It still posted its fourth weekly loss against Japan’s currency, the longest streak since June 2013. It gained 0.3 percent to US$1.1325 versus the euro, paring its decline this week to 1.4 percent.
In Taipei, the New Taiwan dollar posted its biggest weekly drop since March on speculation the central bank might step up intervention amid slowing equity inflows.
The TAIEX retreated 1.3 percent this week after foreigners’ net purchases of local shares totaled US$362 million as of Thursday, poised for the smallest inflow in six weeks. Speculation that the central bank could intervene to curb appreciation has mounted as the exchange rate’s 4.1 percent gain this year threatens to stifle a tentative recovery in exports, a key driver of the nation’s economy.
The central bank “pushed down the Taiwan dollar” this week, said Samson Tu (涂韶鈺), a Taipei-based fund manager at Uni-President Assets Management Corp (統一投信). “If exports aren’t good, the economy generally won’t be good.”
The NT dollar depreciated 0.7 percent against the greenback this week and closed at NT$31.618 to the US dollar, Taipei Forex Inc data showed.
Meanwhile, the pound fell the most in two weeks as Prime Minister Theresa May was said to be leaning toward the first part of next year as the best moment to trigger the start of formal talks over the UK’s withdrawal from the EU. Sterling fell against 13 of its 16 major peers, paring a weekly advance against the US dollar.
While reports in the British media recently suggested May could wait until the end of next year before opening two years of negotiations through triggering Article 50, she is sympathetic to the case for acting by April at the latest as Germany and France prepare for elections and pro-Brexit campaigners at home warn against delay, said the officials, who asked not to be named discussing private conversations.
“There appears to be some knee-jerk selling,” said Lee Hardman, a London-based foreign-exchange strategist at the Bank of Tokyo-Mitsubishi UFJ Ltd. “The market view is probably that it being triggered sooner may make a harder Brexit more likely. You could argue alternatively that receiving clarity over UK’s future relationship sooner would be a positive development.”
The pound fell 0.8 percent to US$1.3063 as of 4:54pm in London, the steepest decline since Aug. 4. It dropped to a 31-year low of US$1.2798 on July 6. Sterling depreciated 0.6 percent to ￡0.8671 per euro, having reached ￡0.8725 on Tuesday, the weakest level in three years.
The report tempered a week that saw the pound recover versus the US currency. Sterling still posted a weekly gain after reports showed last month’s inflation, retail sales and jobless claims beat analysts’ forecasts, suggesting a more optimistic picture of the post-Brexit economy.
Sterling has dropped more than 12 percent against the US dollar since Britain’s referendum on June 23.
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