SINGAPORE : The U.S. dollar was clinging close to a more than one week peak on Friday as a slew of data overnight pointed to a slowing U.S. economy, with investors betting that the Federal Reserve will further pause its interest rate increases.
The dollar index, which measures the U.S. currency against six rivals, eased 0.059 per cent to 102.02, not far from the 102.15 it touched overnight, the highest since May 2. The index is set to snap a two-week losing streak, gaining 0.7 per cent this week.
Carol Kong, a currency strategist at Commonwealth Bank of Australia, said the market is probably encouraged by weak U.S. economic data and continues to price in some pretty aggressive rate cuts by the Fed this year.
Kong said currencies will probably trade in a relatively tight range during Asian hours. “Given the data calendar today is pretty light, I think currencies likely remain in the recent ranges and markets will be pretty quiet going into the weekend.”
The number of Americans filing new claims for unemployment benefits jumped to a 1-1/2-year high last week, pointing to cracks in the labour market as demand slows, according to data on Thursday, which also showed that producer prices rebounded modestly in April.
The reports were seen as consistent with most economists’ expectations of a recession by the end of the year.
“These figures should please the Fed, as any softening in labour markets would help cool U.S. inflation,” said Ryan Brandham, head of global capital markets, North America, at Validus Risk Management.
Markets are pricing in a 98 per cent chance of the Fed standing pat in its June meeting but has started to price in deep cuts in interest rates by the end of the year, the CME FedWatch Tool showed. Rate futures contracts point to trader expectations for the Fed to start cuts in September.
Minneapolis Federal Reserve President Neel Kashkari said on Thursday that an extended period of high interest rates and an inverted yield curve could put more stress on banks, but would be necessary if inflation stays stubbornly high.
Source: Reuters
