NEW YORK: The dollar edged lower but was still on track for the second straight week of gains against major peers on Friday after data continued to show US economic resilience, which might complicate the Federal Reserve’s efforts to cut interest rates.
The dollar was down 0.1 percent to 149.65 against the Japanese yen, on track for the fifth consecutive week of gains and trading near its highest level since August 1.
The euro was up 0.17 percent to USD1.16845. It was on course to finish the week lower, snapping three straight weeks of gains. US consumer spending, which accounts for more than two-thirds of economic activity, rose 0.6 percent in August, slightly higher than the 0.5percent estimated by economists polled by Reuters.
The Personal Consumption Expenditures Price Index, which is the Fed’s preferred inflation measure, rose 0.3 percent last month, in line with expectations, US Commerce Department data showed.
“I think it’s pretty clear that stronger economic data has taken the steam out of the pricing for Fed rate cuts and that’s sort of narrowed the interest rate differential with other countries and pushed the dollar higher,” said John Velis, Americas FX and macro strategist at BNY in New York. “We still think that hedging behaviour is quite strong so we still see lots of forward selling of dollars even while the US assets, particularly US equities, continue to gain influence from abroad, although that’s taken a little bit of a backseat this week as well to some degree. But I think it’s fairly clear that as Fed expectations go so will the dollar go in the short term,” Velis added. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.17 percent to 98.33. It was still on track for the second straight week of gains. The two-year note yield, which typically moves in step with interest rate expectations for the Fed, rose 0.2 basis points to 3.666 percent.