The US dollar slipped against a basket of currencies on Friday after two volatile days, as investors focused on how aggressive the US Federal Reserve might be in hiking rates as it tackles rising inflation.
The US dollar index hit a 20-year high overnight on safe-haven demand, following Thursday’s sharp stock sell-off driven by concerns about the Fed’s aggressive tightening and as European currencies weakened on worries about growth in the region.
However, it retraced some of the gains as investors evaluated how much of the Fed’s hawkishness was already priced into the greenback, and some analysts said inflation might close to a peak.
Photo: Reuters
Data on Friday showed US jobs increased more than expected last month. Average hourly earnings rose 0.3 percent after advancing 0.5 percent in March. That lowered the year-on-year increase in wages to 5.5 percent from 5.6 percent in March.
“The good news is that wages were not going up as fast as they were, and that should begin to calm down that speculation. The market will have to recognize that maybe inflation is peaking,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
The US dollar index reached 104.07, the highest since December 2002, before falling back to 103.66, down 0.09 percent on the day, but up 0.68 percent from a week earlier.
The Fed would have to raise interest rates more aggressively and risk a recession if supply chain issues do not begin to ebb, Minneapolis Fed President Neel Kashkari said on Friday.
The euro also got a boost on Friday by relatively hawkish comments from European Central Bank (ECB) officials.
The ECB should raise its deposit rate back into positive territory this year, Bank of France Governor Francois Villeroy de Galhau said, comments that point to his support for at least three rate hikes this year.
ECB policymaker Joachim Nagel also said that the central bank’s window for raising interest rates in response to record-high inflation is slowly closing, indicating that he backed a move sooner rather than later.
The euro closed up 0.06 percent at US$1.0548, after earlier falling to US$1.04830. It is holding just above a five-year low of US$1.0470 reached on April 28.
The New Taiwan dollar lost ground to the US US dollar on Friday, declining NT$0.151 to close at NT$29.660, down 0.61 percent from a week earlier.
Sterling fell to its lowest level since June 2020, a day after the Bank of England raised interest rates to their highest since 2009, but said that the economy was at risk of recession.
The British currency was down 0.15 percent at US$1.234, after dropping to US$1.2276.
Additional reporting by CNA, with staff writer
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