SINGAPORE – The dollar wavered at 15-month lows on Friday after a sharp decline overnight, as markets bet the Federal Reserve was near the end of its rate-hike cycle due to declining inflation.
The dollar index, which measures the US currency against six major rivals, settled at 99.71 in early Asian trading, its lowest level since April 2022. The index is on track for its worst week since November.
US producer prices rose barely in June and the annual increase in producer inflation was the lowest in nearly three years, data showed Thursday, a day after consumer prices rose modestly in June. last month as evidence mounted that the world’s largest economy had entered an easing phase. inflation.
“Overall, markets are quite welcome on the lower inflation data, because lower inflation coupled with the still resilient labor market supports the narrative of a soft landing in the US economy,” said Carol Kong, currency strategist at Commonwealth Bank of Australia in Sydney.
“But we still hold our view that the US will enter a recession later this year due to the impact of past and potentially future interest rate hikes.”
Markets are pricing in a 92 percent probability of a 25 basis point hike by the Fed later this month, the CME FedWatch tool showed, but no more for the rest of the year.
Data on Thursday also showed that the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, indicating that the labor market remains tight even as job growth is slowing.
Ryan Brandham, head of global capital markets, North America, at Validus Risk Management, said data on weekly jobless claims and producer prices support a soft landing.
“If the Fed wants to raise rates again later this month… the jobs data will reassure them. Although the recent trend of lower inflation may be encouraging, it is probably not enough to change the committee’s decision.
Still, Fed officials remain cautious, and Federal Reserve Governor Christopher Waller says he’s not ready to say the all-clear on US inflation and is in favor of more inflation hikes. rates this year.
Meanwhile, the Australian dollar fell 0.16 percent to $0.688 after Michele Bullock was appointed head of Australia’s central bank on Friday, becoming the first female governor as she undertakes a sweeping reorganization.
The euro hit a fresh 16-month high of $1.1229 in Asian hours before falling to $1.1222, while sterling last hit $1.3119, down 0.11 percent on the day. . The pound topped $1.30 on Thursday for the first time since April 2022.
The Japanese yen strengthened 0.23 percent to 137.71 per dollar and is on track for its best week against the dollar since January.
In cryptocurrency, bitcoin was last up 0.03 percent at $31,367.56, after hitting nearly two-month highs of $31,818 overnight. Ethereum was last up 1.4 percent at $2,014.10.
A US judge ruled that Ripple Labs did not violate federal securities law by selling its XRP token on public exchanges.
The XRP token was down 7 percent in early Asian hours to trade at $0.7546 after rising 76 percent on Thursday.
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