US dollar slides for second straight day

New York

THE dollar fell for a second straight session on Friday, tracking declines in US Treasury yields, as investors booked profits after recent sharp gains, though the decline was viewed as temporary. US 10-year Treasury yields were last at 1.484 per cent, down nearly six basis points.

For the week, the dollar index posted its largest percentage gain since late August, as investors looked to the Federal Reserve's reduction of asset purchases in November and a possible rate hike late next year.

Cautious market sentiment due to Covid-19 concerns, wobbles in China's growth and a Washington gridlock ahead of a looming deadline to lift the US government's borrowing limit has lent support to the dollar, seen as a safe-haven asset.

"The more hawkish stance appears to have been the key factor driving the dollar higher in late September," said Marc Chandler, chief market strategist, at Bannockburn Global Forex. "However, more immediately, fiscal policy is the focus, though investors appear to be looking through it, as many find it inconceivable that the US would default on its debt," he added.

Friday's batch of US data was mixed, adding to dollar weakness ahead of the weekend.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

US consumer spending increased more than expected in August, posting a 0.8 per cent rise, but consumption was weaker than initially thought in July, dipping 0.1 per cent instead of gaining 0.3 per cent. Inflation remained elevated, but not by much.

Manufacturing data was more upbeat. The Institute for Supply Management said its index of national factory activity increased to a reading of 61.1 last month from 59.9 in August.

In other currencies, the euro rose 0.1 per cent to US$1.1595, falling about 1.1 per cent for the week, its biggest percentage fall since mid-June.

The yen bounced back against the dollar from a 19-month low overnight, with the greenback last down 0.2 per cent at 111.105 yen.

Commodity currencies rallied against the US dollar on Friday as well.

The Australian dollar gained 0.6 per cent to US$0.7270 and slumped 3.6 per cent in the third quarter - the worst performance of any G-10 currency against the dollar - as prices for Australia's top export, iron ore, fell sharply.

Sterling was also an underperformer last quarter, dropping 2.5 per cent, and posting its worst week in more than a month, amid growing supply chain problems. Sterling was last up 0.6 per cent though at US$1.3552, just above a nine-month low at US$1.3516. REUTERS