The US dollar on Friday fell against major currencies as US yields languished and the euro got an extra late-day lift following a earlier boost from an upbeat survey of purchasing managers.
The US dollar index fell 0.5 percent to 90.808, down 0.8 percent from a week earlier, after the euro climbed 0.7 percent to US$1.2098, pushing through its earlier high for the week.
More than half of the euro’s appreciation came late in the day after the market digested earlier economic news.
“This is thin markets on a Friday afternoon,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York. “The euro making new highs for the week late in the day suggests it is going to have momentum into next week.”
The exaggerated move came after the markets saw a European purchasing managers’ index for this month come in better than expected, supporting the view that the region’s economic recovery is accelerating and is unlikely to keep lagging so far behind the US recovery.
A similar US survey showed factory activity powered ahead this month, while another report said that new home sales in the US jumped 21 percent last month.
Both reports affirmed that the US economy was being lifted by government stimulus and increased COVID-19 vaccinations.
The US survey results were tempered by manufacturers reporting increased struggles to obtain raw materials and other supplies for production.
Yields on 10-year US Treasuries traded in a narrow range through the news and were at 1.56 percent late in the day, about four basis points lower than at the start of the week.
Until the late-day boost to the euro, Chandler said Friday’s major currency markets were largely “a continuation of what we have seen since the beginning of the month,” with the US dollar losing much that it had gained earlier in the year as yields climbed to 1.75 percent on March 31.
“The dollar had a very strong first quarter and the market is still unwinding that,” Chandler said.
In the first quarter, the US dollar gained 3.6 percent, but it has lost about 2.6 percent so far this month.
Markets are now looking toward next week’s meeting of the US Federal Reserve Open Market Committee to review monetary policy and the economy.
Fed chairman Jerome Powell is expected to echo Thursday’s message from European Central Bank President Christine Lagarde that scaled back some expectations for a withdrawal of monetary easing.
Powell’s remarks could put more downward pressure on Treasury yields and limit any bounce of the US dollar.
The New Taiwan dollar on Friday rose against the greenback gaining NT$0.030 to close at NT$28.111, increasing 0.81 percent from NT$28.341 a week earlier.
Additional reporting by CNA, with staff writer
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