The US dollar on Friday slipped to a four-week low against a basket of currencies, still smarting from a sharp drop in US Treasury yields the previous session, and as investors increasingly bought into the US Federal Reserve’s insistence that it would keep an accommodative policy stance for a while longer.
The benchmark 10-year Treasury yield dipped to a one-month low of 1.528 percent overnight, moving further away from last month’s 1.776 percent, its highest in more than a year, even in the face of Thursday’s stronger-than-expected retail sales and employment data.
On Friday, the 10-year recovered some ground to trade at 1.5816 percent.
“It’s a little bit of a change, of course,” said Minh Trang, senior foreign exchange trader at Silicon Valley Bank.
Trang cited some profit-taking after the greenback’s sharp appreciation last month as well as the retreat in Treasury yields as main reasons for the US dollar’s weakness.
Investors’ healthy appetite for riskier assets, such as equities, has also sapped some of the safe-haven demand the US dollar typically enjoys, Trang said.
Some market participants expect the US dollar weakness to persist.
“My best guess is the 10-year Treasuries won’t move a great deal from here over the coming quarter and that sets the backdrop for the recent dynamics we’ve seen, with dollar weakness continuing much of this current quarter,” Mizuho Financial Group Inc senior economist Colin Asher said.
The US dollar index measuring the greenback against a basket of six currencies was 0.129 percent lower at 91.545, its lowest since March 18. For the week, the index was down 0.7 percent, posting its second straight weekly decline.
In Taipei, the New Taiwan dollar rose against the greenback, gaining NT$0.041 to close at NT$28.341, rising 0.3 percent for the week.
San Francisco Fed President Mary Daly said the US economy was still far from making “substantial progress” toward the central bank’s goals of 2 percent inflation and full employment, the bar the Fed has set for beginning to consider reducing its support for the economy.
That echoed Fed Chairman Jerome Powell’s comments in several speeches over the past week that policymakers would look through near-term rises in prices amid ongoing slack in the labor market.
On Friday, the US Department of the Treasury said it would continue enhanced engagement with Vietnam and Switzerland, and initiate similar talks with Taiwan after concluding that all three countries met the criteria under a 2015 US currency manipulation law.
Additional reporting by CNA, with staff writer
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