NEW YORK: The dollar fell for a second straight session on Friday as recent economic data and a drop in oil prices slightly cooled expectations for Federal Reserve rate hikes, although the yen remained in territory that left it primed for an intervention.
Despite the recent declines, the greenback was still up for the week and on pace for its strongest monthly percentage gain since July after hitting a 13-month high earlier in the week.
Thursday’s data showing a key measure of US inflation met economists’ expectations and easing oil prices, down about 4 percent on Friday, have moderated rate-hike bets slightly. Markets are still pricing in an increase in rates of roughly 25 basis points from the Fed this year, according to LSEG data.
The dollar had kicked off the week with three straight days of gains, continuing an uptrend that began the prior week after a policy statement from the Fed, and first under new Chairman Kevin Warsh, was largely seen as hawkish by market participants.
“Not only has it been Warsh and some new data, but it’s also been kind of a dollar bull market since January,” said Joseph Trevisani, senior analyst at FXStreet in New York.
“So a little bit of pullback is not surprising.” Inflation data that was softer than feared on Thursday helped spark the retreat in the dollar.
On Friday, the University of Michigan’s Surveys of Consumers said its Consumer Sentiment Index increased to a final reading of 49.5 this month, slightly below the 50.0 estimate of economists polled by Reuters, from 44.8 in May, although concerns about inflation remain.
The dollar index, which measures the greenback against a basket of currencies, fell 0.19 percent to 101.32 but was on track for a second straight weekly gain, with the euro up 0.18 percent at USD1.1389. Minneapolis Fed President Neel Kashkari said on Friday that the central bank may need to raise rates amid broad inflation. On Thursday, Federal Reserve Bank of New York President John Williams said that while inflation pressures are likely to moderate this year, they remain too high, and pushed back his timeline for getting inflation back to the Fed’s 2 percent target. US crude dropped 3.6 percent to USD69.33 a barrel and Brent fell to USD72.02 per barrel, down 4.34 percent on the day, and were on track for weekly declines of nearly 10 percent as more oil tankers exited the Strait of Hormuz.
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