Dollar edges up, but still set for weekly decline
THE dollar edged up against major currencies on Friday (May 17) but was still headed for a weekly fall, as market speculation continues to swirl about the timing of Federal Reserve rate cuts amid signs of cooling inflation and a softening US economy.
Data on Wednesday showed consumer prices rose more slowly than expected in April, but various policymakers have given little away on when rates may fall, limiting the dollar’s declines this week.
The dollar index – which tracks the US currency against six peers – was up 0.2 per cent on Friday at 104.73, but was still on track for around a half-percentage-point weekly decline.
Futures markets are currently pricing in 46 basis points of Federal Reserve rate cuts by the end of this year.
“The comments this week from Fed officials were in our view still indicative of a Fed that would be willing to turn and cut relatively quickly if the evidence becomes available to back it up,” currency analysts at MUFG said in a note.
Even though markets price European rate cuts beginning in June, recent data has shown some upside surprises. Germany’s economy grew more than expected last quarter and investor morale is at a two-year high.
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Eurozone consumer inflation data on Friday came in at 2.4 per cent year-on-year in April, in line with a Reuters poll.
The euro dipped 0.2 per cent on the day to US$1.0844. It is still up around 0.7 per cent on the dollar this week.
Eurozone policymakers have increased confidence that inflation will ease back to target next year due to easing price pressures, ECB Vice-President Luis de Guindos said on Friday.
Largely disappointing Chinese data on Friday helped keep market risk sentiment in check. Factory output topped forecasts but retail sales slowed and home prices fell at their fastest pace in more than nine years.
Sterling edged 0.1 per cent lower to US$1.26555. The dollar gained 0.3 per cent on the Japanese yen at 155.9.
In cryptocurrency markets, bitcoin was up 1.6 per cent at US$66,322. REUTERS
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