The US dollar edged lower on Friday for a second straight weekly decline as traders pared expectations for US Federal Reserve interest rate hikes, and as improving inflation and consumer spending data eased recession fears.
The US dollar index, which measures the safe-haven currency against a basket of six other major currencies, fell as low as 101.43, its weakest since April 25. On a weekly basis, it was down 1.24 percent, following a 1.45 percent decline the previous week.
“We continue to think that the best of the broader USD rally is behind us now and while the USD may not fall significantly yet, further gains seem unlikely,” strategists from Scotiabank said in a client note.
The “Fed is fully priced and expectations for rate hikes later in the year may be subject to revision if the economy slows more quickly than expected,” they said.
The euro has been the chief beneficiary of the US dollar’s decline, but that momentum has also stalled as investors believe much of the expected rate hikes from the European Central Bank have been priced into current levels.
The single currency was flat for the day at US$1.0731, having earlier risen to its highest levels in a month.
Sterling was 0.16 percent higher at US$1.2628.
The risk-sensitive Australian dollar rallied 0.8 percent to US$0.7156, while the New Zealand dollar jumped 0.88 percent to US$0.6535.
In Taipei, the New Taiwan dollar rose against the greenback, gaining NT$0.155 to close at NT$29.350, up 1 percent for the week.
The greenback hit a nearly two-decade peak above 105 earlier this month, but has declined along with outlooks for the magnitude of likely Fed rate hikes this year, which have been fueled in part by fears over runaway inflation.
“The dollar is losing altitude as the view of the Fed pausing rate hikes in the fall gains traction,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.
Minutes released this week from the Fed’s meeting earlier this month showed that most participants believed 50 basis-point hikes would be appropriate at the policy meetings next month and in July, but many thought big, early hikes would allow room to pause later in the year to assess whether tighter policy is helping to tame inflation.
The personal consumption expenditures (PCE) price index rose 0.2 percent, the smallest gain since November 2020, after shooting up 0.9 percent in March. For the 12 months through last month, the PCE price index advanced 6.3 percent after jumping 6.6 percent in March.
Additional reporting by CNA, with staff writer
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