Dollar on track for best quarter in a year

02 Oct, 2023

NEW YORK: The dollar was on track to post its biggest quarterly gain in a year on Friday and gains for the 11th consecutive week as investors priced in the likelihood of a still solid economy and higher rates for longer.

The greenback retraced most earlier losses against a basket of currencies to be only slightly lower on the day, following data that showed that US consumer spending increased in August, but underlying inflation moderated, with the year-on-year rise in prices excluding food and energy slowing to less than 4.0%.

“Prices are higher on a monthly basis, but overall, inflation is moving lower. It’s good news for the market because the Fed is looking at the core rate,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. The dollar has gained on expectations that the US economy will remain more resilient to higher interest rates and oil prices than other economies, after the Federal Reserve last week warned it may hike rates further and is likely to hold them higher for longer.

The dollar index, which tracks the US currency against six others, fell 0.05% to 106.09 on Friday and is track to end the quarter up 3.13% and post an 11th straight weekly rally - its longest such run in nine years. It is down from a 10-month high of 106.84 on Wednesday.

Meanwhile, a partial government shutdown is looming, which could affect the release of economic data and potentially dent economic growth.

Hardline Republicans in the US House of Representatives on Friday rejected a bill proposed by their leader to temporarily fund the government, making it all but certain that federal agencies will partially shut down beginning Sunday.

The euro gained 0.10% on the day to $1.0578, but is set for its worst quarter against the dollar in a year, with a 3.08% decline. The single currency has bounced from an almost nine-month low of $1.0488 on Wednesday.

Sterling rose 0.04% to $1.2206, having this week hit its lowest since March 17, after data on Friday showed Britain’s economic performance since the start of the COVID-19 pandemic has been stronger than previously thought. The British currency is on track for a quarterly loss of 3.85% against the US dollar, the worst performance in a year.

Read Comments