The US dollar declined on Friday, along with US Treasury yields, while investors looked ahead to next week’s US Federal Reserve meeting for more clarity on the outlook for rate hikes.
Expectations that the Fed will tighten monetary policy at a faster pace than previously anticipated had driven a rise in yields and the US dollar earlier this week.
US Treasury yields fell as stock market declines reflected poor risk appetite, while concerns about potential conflict in Ukraine drove demand for the safe-haven debt.
Markets are pricing in as many as four rate hikes this year, starting from March and expect the Fed to start trimming its US$8 trillion-plus balance sheet within months.
Next week’s Fed meeting could shed some light on how fast it will tighten.
“Everything is going to be somewhat calm” until the Fed releases its statement on Wednesday after the two-day meeting, said Bipan Rai, North American head of foreign exchange strategy at CIBC Capital Markets in Toronto. “It makes sense the dollar is somewhat muted today given the lack of real impetus from the data front.”
In Taipei, the New Taiwan dollar yesterday rose against the greenback, gaining NT$0.002 on a make-up day for the Lunar New Year holiday to close at NT$27.700, down 0.3 percent for the week.
The US dollar index, which tracks the greenback against major peers, was down 0.1 percent on the day at 95.650, but up 0.5 percent for the week.
Against the yen, the dollar was down 0.4 percent at ￥113.680. For the week, the US dollar was down about 0.5 percent against the yen.
The euro was up 0.3 percent against the US dollar at US$1.1341, while it was down about 0.6 percent for the week.
The pound weakened broadly on Friday, pulling back from a 23-month high versus the euro touched in the previous session as weakness in Wall Street prompted investors to take profits after a rally this week.
Against the US dollar, the pound eased 0.24 percent at US$1.3560, its lowest level in more than a week.
Versus the euro, the pound weakened 0.6 percent at ￡0.8364, moving away from a February 2020 high of ￡0.8307 tested on Thursday.
Traders have pushed the pound higher on expectations the Bank of England would raise interest rates as early as next month to combat soaring inflation.
Money markets price in more than 100 basis points (bps) in interest rate rises this year and an 87 percent chance of a 25 bps increase in February, after data showed on Wednesday that UK inflation last month rose faster than expected to its highest in nearly 30 years.
Another factor weighing on the pound was weak retail sales data. British retail sales slumped last month after consumers did much of their Christmas shopping earlier than usual in November.
Additional reporting by CNA, with staff writer
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