US dollar down after data but set for ninth straight weekly climb

THE US dollar was lower on Friday (Sep 15), after data showed a dip in consumer sentiment, but the greenback was still poised for a ninth straight week of gains, while the yen weakened to a 10-month low.

The University of Michigan’s preliminary reading of its Consumer Sentiment Index dropped to 67.7 this month from a final reading of 69.5 in August and below the forecast of 69.1 among economists polled by Reuters. However, consumers saw inflation lower on both a one-year and five-year basis.

Earlier data from the Labor Department showed that import prices increased 0.5 per cent last month as fuel prices jumped, but underlying price pressures stayed subdued while a separate report from the New York Fed showed factory activity picked up in the state in September.

Joseph Trevisani, senior analyst at FXStreet.com said: “If the credit markets are still convinced that when you increase rates as much as the Fed has, you eventually get a recession ... where do people go? They go to the dollar.”

The Federal Reserve will hold a policy meeting on Sep 19-20 and the central bank is largely viewed as keeping interest rates unchanged, with a 97 per cent expectation for no action, according to CME’s FedWatch Tool.

After edging higher earlier in the week, expectations for a 25 basis-point hike at the November meeting have declined to 30.6 per cent from 43.6 per cent a week earlier, with a small chance of a cut being priced in as early as January.

The US dollar index was down 0.08 per cent at 105.32, but was still poised for its ninth straight weekly gain, which would mark its longest weekly run since a 12-week streak of gains in 2014.

The greenback continued to strengthen against the yen, after the Japanese currency had a sharp move higher versus the dollar earlier in the week. The dollar was last up 0.25 per cent at 147.84 yen after hitting a 10-month high of 147.96.

The euro was up 0.2 per cent at US$1.0666, having recovered slightly from Thursday’s six-month low of US$1.0629 following the European Central Bank’s (ECB) policy announcement, in which it raised rates to a record-high 4 per cent but signalled it was likely done with hikes.

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US dollar on track for ninth weekly gain

However, ECB policymakers pushed back on the idea the central bank was done with rate hikes, saying rates will be kept high for an extended period and could even be raised again if needed.

The euro was on track for a ninth straight weekly fall against the dollar.

Sterling, declined 0.2 per cent at US$1.2386. Along with the Fed, the Bank of England will also make a policy announcement soon. REUTERS