Dollar set to snap 5-week losing run as Fed rate cut bets pared
Shafaq News/The dollar traded near a one-week high versus major peers on Friday, on trackto snap a five-week losing streak, after robust economic data pared bets foraggressive Federal Reserve interest rate cuts.
The eurolanguished close to a two-week low to the dollar as cooling inflation inGermany and Spain boosted the case for European Central Bank easing.
The yen heldnear the closely watched 145 per dollar level after weakening on Thursday, asthe greenback tracked a rise in U.S. Treasury yields.
The Japanesecurrency largely ignored data on Friday showing core consumer prices in Tokyoclimbing at a faster-than-expected 2.4% in August, again topping the Bank ofJapan's 2% target, although a measure that also strips out energy costs rose byjust 1.6%.
Overnight,U.S. data showed gross domestic product (GDP) grew a 3.0% annualised rate inthe second quarter, an upward revision from the 2.8% rate reported last month.Economists polled by Reuters had forecast GDP would be unrevised.
"That'sbeen the market mover from the price action overnight, particularly when youlook at currencies and U.S. Treasury yields," said Rodrigo Catril, seniorFX strategist at National Australia Bank, referring to the GDP reading.
"Thetakeaway there - the highlight - is that the consumer was stronger than hadpreviously been thought," he added. "The exceptionalism of the U.S.was still evident in Q2."
Traders nowmore strongly favour a quarter-point Fed rate reduction on Sept. 18, layingonly 34% odds of a 50-basis point (bp) cut, down from 38% a day earlier,according to the CME Group's FedWatch Tool.
The U.S.dollar index - which measures the currency against a basket of six major peers- was little changed at 101.40 as of 0505 GMT, after rising 0.36% on Thursdayand touching the highest since Aug. 22 at 101.58.
It is oncourse for a 0.7% gain this week, which would be its best week since the startof April. Over August though, it is set for a drop of about 2.5%, which wouldbe its worst month since November.
The dollareased 0.13% to 144.80 yen , after rising as high as 145.55 overnight for thefirst time since Aug. 23.
The euro wasflat at $1.10755 and dropped as low as $1.10555 on Thursday. Later in the day,more consumer inflation readings from around Europe are due, including France,Italy and the euro zone as a whole.
The UnitedStates also sees the release of the core personal consumption expenditures(PCE) price index, the Fed's preferred inflation gauge.
Sterling wassteady at $1.3165 after dipping to $1.3146 overnight for the first time sinceAug. 23.
TheAustralian and New Zealand dollars hung near their highest levels this year,with recent data pointing to less need for imminent rate cuts.
The Aussierose slightly to $0.68015 after hitting the highest since Jan. 2 at $0.6824 aday earlier, as it continued to draw support from hotter-than-expected consumerprice figures this week. The currency shrugged off an unexpected stagnation inretail sales data on Friday.
NewZealand's kiwi added 0.08% to $0.6262, after reaching $0.6298 on Thursday forthe first time since Jan. 2. A survey of consumers on Friday showed a pick-upfrom deep lows in August, after business confidence surged to the highest in adecade, a survey showed the previous day.
China's yuanfirmed to a two-month high on Friday, heading for its biggest monthly jumpsince November, amid growing corporate demand for the Chinese currency asexpectations heighten for U.S. rate cuts.
Spot yuanstrengthened as far as 7.0895 per dollar before last changing hands at 7.0913,on track for a rise of about 2% for August.
"In theshort term, we cannot rule out the possibility of a 'stampede' for currencyconversion" that could boost the yuan above 7.0 per dollar, ChinaInternational Capital Corp (CICC) said in a note.
(Reuters)
