US Dollar weakens further after US ECI data
Washington (July 31) The dollar added to earlier losses on Friday as a U.S. government index on employment cost rose less than forecast, paring bets the Federal Reserve may interest rates later this year.
The dollar index that gauges the greenback's value against a basket of currencies was last down 0.92 percent at 96.65.
The greenback reversed its earlier gains versus yen. It last traded down 0.3 percent at 123.78 yen.
The euro accelerated its rise against the dollar, last up 1.22 percent at $1.1048.
Another 1 percent fall in Brent crude helped drive the Norwegian crown and Australian and Canadian dollars lower while the New Zealand dollar handed back all of the past week's gains to fall almost 1 percent to $0.6543.
But the fall against the euro kept the dollar in negative territory overall, another signal of the lack of the conviction that has seen it stall more broadly against the single currency and yen since March.
"It has been a typical Friday where profit is taken off the table," said Tobias Davis, corporate hedging manager at Western Union in London.
The decisive factor for the dollar looking forward will be whether the Fed delivers on the expectations of some banks of a rise in interest rates in September with the next big moment next Friday's monthly jobs numbers.
After the Fed meeting this week, Davis said there was around a 40 percent chance of a rise in rates for September priced into the market. December looks just as likely.
"It is still a story of data dependence," he said. "The growth number (this week), although not amazing, was still sound. Spanish unemployment and growth figures, and the reading of inflation this morning may also put a floor under the euro."
The flash estimate on Friday showed euro zone inflation steady at just 0.2 percent in July. But core inflation was higher than expected at 0.9 percent and there had been fears of a yet lower reading after Thursday's reports from Germany and Spain.
The view that a U.S. rate hike would come by the end of the year has helped the dollar gain almost 2 percent against a basket of major currencies this month.
Shinji Kureda, head of FX trading group for Sumitomo Mitsui Banking Corporation in Tokyo, said market players were likely to be wary of buying the dollar at levels above 124.50 yen. Bank of Japan Governor Haruhiko Kuroda said in June he saw no reason for further currency weakness when the dollar was around 125 yen.
"The trend of dollar strength will probably continue heading into the U.S. jobs data next week," he said.
Source: CNBC
