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US dollar posts steepest loss in three weeks on US rate-hike doubts

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The US dollar fell against a basket of major currencies on Friday, recording its biggest one-day fall in three weeks, on persistent doubts whether the Federal Reserve would raise interest rates again this year due to softening inflation data.

[NEW YORK] The US dollar fell against a basket of major currencies on Friday, recording its biggest one-day fall in three weeks, on persistent doubts whether the Federal Reserve would raise interest rates again this year due to softening inflation data.

The greenback also broadly weakened versus commodity-linked currencies, which got a boost as global benchmark Brent futures recovered from a seven-month low.

Sterling rose for a third consecutive day after soon-to-depart Bank of England policymaker Kristin Forbes late on Thursday urged hiking UK rates immediately on fears that the pound's weakness could have a lasting upward effect on inflation.

Trading volume was muted in the absence of major economic data.

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"This has been largely a week of consolidation among major currency pairings given the lack of economic data this week," said Omer Esiner, chief market strategist at Commonwealth Foreign Exchange in Washington.

The US dollar index, which tracks the US dollar against six major peers, fell 0.35 per cent at 97.248, retreating further from a one-month peak reached on Tuesday.

The euro was up 0.44 per cent at US$1.1198, while the greenback slipped nearly 0.1 per cent against the yen, to 111.25 yen.

The pound gained 0.4 per cent at US$1.2725.

The greenback rose earlier this week on comments from New York Fed President William Dudley, who said a tightening labour market would push up wages and cause US inflation to reverse upward toward the Fed's 2 per cent goal.

On Friday, St Louis Fed chief President James Bullard said the central bank should wait on further rate hikes, while Cleveland Fed chief Loretta Mester said recent inflation weakness should not defer another rate rise this year.

Traders, however, were doubtful about another rate increase later this year as recent US data on balance have fallen short of forecast.

On Friday, Markit's flash June reports on US factory and services activity was weaker than expected, while the government said new-home sales rebounded more than expected in May.

"The data need to confirm the Fed's stance for another rate hike this year," Mr Esiner said.

The futures market implied traders saw a 49 per cent chance the Fed would raise rates in December, CME Group's FedWatch programme showed.

Meanwhile, commodity-linked currencies rose with a rebound in crude oil prices. Brent crude futures settled 0.7 per cent higher at US$45.54 a barrel after hitting their lowest level since November on Thursday.

The Australian dollar was up 0.5 per cent at US$0.7575, while the New Zealand dollar was up 0.3 per cent at US$0.7288.

REUTERS

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