Stronger dollar down for the week as clues point to inflation peak
Add BT as a preferred source
THE dollar rallied on Friday (Aug 12) but was set for a weekly drop as traders weighed improving US inflation data against comments from Federal Reserve officials who cautioned that the battle against rising prices was far from over.
US import prices declined for the first time in 7 months in July on lower costs for both fuel and non-fuel products, data showed on Friday, in the third report during the week to hint that inflation may have topped out.
Another 2 key inflation measures, for consumer prices and producer prices, cooled in July, data showed, prompting traders to pare back views that the Fed will raise interest rates by 75 basis points for a third consecutive time when it meets in September.
After 4 straight down days, including a more than 1 per cent drop on Wednesday, the dollar rallied against its major rivals on Friday, but was still on track for a decline of around 0.84 for the week. The greenback’s turnaround followed a steady drumbeat from Fed officials who made clear they would continue to tighten.
Traders were pricing in around a 42.5 per cent chance of a 75 bps Fed rate hike in September and a 57.5 per cent chance of 50 bps.
The dollar was up 0.39 per cent against Japan’s currency, with the greenback at 133.495 yen.
The British pound fell 0.6 per cent to US$1.2141 versus the dollar. Data showed UK GDP contracted by less than forecast in June, even though an extra public holiday had been expected to cause a big drag.
The euro was down 0.53 per cent at US$1.0262. The euro has been weighed down by Europe’s struggles with the war in Ukraine, the hunt for non-Russian energy sources and a hit to the German economy from scant rainfall. Commerzbank said in a note it had revised its euro-dollar forecast lower, as it expects a euro-area recession as a base scenario, having previously been a “risk scenario”.
The bank said it expects the euro to fall to US$0.98 in December and to not recover until later in 2023. REUTERS
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
