Dollar extends fall after inflation data knock

THE dollar fell across the board for a second straight day on Friday (Nov 11), as investors favoured riskier currencies following signs US inflation is cooling that boosted the case for the US Federal Reserve to ease off its hefty interest rate hikes. Friday’s dollar weakness was an extension of the move set off after Thursday’s data showed US consumer inflation rose 7.7 per cent year on year in October, its slowest rate since January and below forecasts for 8 per cent.

Against a basket of currencies, the dollar was down about 3.8 per cent over two sessions, on pace for its largest two-day percentage loss since March 2009. The US currency’s long rally over the last two years had drawn a host of dollar bulls leading to crowded positioning and Thursday’s data left a lot of them looking for a quick exit, strategists said.

The dollar was 1.7 per cent lower against the Japanese yen at 138.55 yen while the euro advanced 1.46 per cent against the US unit to US$1.036.

Some strategists warned that dollar bears remain vulnerable to a possible near-term rebound. The dollar found little support from survey data on Friday that showed US consumer sentiment fell in November, pulled down by persistent worries about inflation and higher borrowing costs.

The risk-sensitive Australian and New Zealand dollars advanced 1.4 per cent and 1.6 per cent, respectively, against the greenback.

Investor risk appetite got an additional boost from Chinese health authorities easing some of the country’s strict Covid-19 restrictions, including shortening quarantine times for close contacts of cases and inbound travellers.

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Sterling, meanwhile, rose 1.22 per cent against the dollar to US$1.1853 after UK data showed the economy did not contract as much as expected in the three months to September, although it is still entering what is likely to be a lengthy recession.

The dollar was 2.4 per cent lower against the Swiss franc at 0.94025 francs after Swiss National Bank chairman Thomas Jordan said on Friday the bank was prepared to take “all measures necessary” to bring inflation back down to its 0-2 per cent target range.

Cryptocurrencies remained under pressure from ongoing turmoil in the crypto world after exchange FTX’s fall. FTX’s native token, FTT, was last down 26.7 per cent at US$2.731. REUTERS