US dollar rises but still set for biggest weekly loss since May

New York

THE US dollar rose on Friday along with other safe haven currencies as stocks fell and as upbeat US economic data helped reverse some of the losses from earlier last week when dovish remarks by the Federal Reserve tanked a month-long rally in the greenback.

Friday's gains for the US currency came as stocks fell following a glum earnings report by Amazon, growing concerns over the rapid spread of the Covid-19 Delta variant, and in the wake of a regulatory crackdown by China on its technology and education sectors.

Japan's yen and Norway's kroner, which are also seen as safehaven currencies, were up 0.26 per cent and 1.27 per cent respectively.

The dollar also got a lift after St Louis Federal Reserve president James Bullard said the Fed should start reducing its US$120 billion in monthly bond purchases this fall and cut them "fairly rapidly" so the programme ends in the first months of 2022 to pave the way for a rate increase that year if needed.

The greenback slumped earlier last week after Fed chair Jerome Powell said rate increases were "a ways away" and the job market still had "some ground to cover".

Economic data on Friday was dollar-positive, showing a higher-than-expected rise in US consumer spending in June as Covid-19 vaccinations boosted demand for travel-related services and recreation, even though part of the increase reflected higher prices, with annual inflation accelerating further above the Fed's 2 per cent target.

The euro eased 0.26 per cent against the greenback but near a one-month high after data showed the eurozone economy grew more quickly than expected in the second quarter, pulling out of a pandemic-related recession, while inflation shot past the European Central Bank's 2 per cent target in July.

Meanwhile, the Chinese yuan had recovered all of its losses from Tuesday's plunge to trade at 6.4660 per dollar. The Australian and New Zealand dollars, seen as riskier assets, were down on the day but remained near two-week highs.

Sterling edged 0.5 per cent lower versus the dollar ahead of a Bank of England meeting. REUTERS