The U.S. dollar is heading for its longest stretch of weekly losses in almost three years as traders anticipate the end of the U.S. Federal Reserve's rate-hike cycle. This follows signs that inflation
may be cooling, with data from Thursday showing that U.S. wholesale prices fell by the most in nearly three years last month. The consumer index, or CPI, also softened as expected. The dollar index, which measures the performance of the U.S. currency against six others, slid to a roughly one-year low of 100.78. It was last down 0.1% at 100.90, and was headed for a weekly decline of more than 1%, its steepest drop since January.
Investors are holding the largest bearish position in the dollar against the euro out of the G10 currencies. Weekly data from the Commodity Futures Trading Commission shows that money managers collectively held a $19.631 billion long position in the euro, while holding short positions against the yen, sterling, the Canadian, Australian and New Zealand dollars, and the Swiss franc.
"The easiest way to express a dollar-negative view has been with the euro," said Ray Attrill, head of FX strategy at National Australia Bank.
RBC Capital Markets have a year-end target of $1.03 for the euro/dollar pair, which on Friday, was trading around $1.1061, up 0.1% on the day and at one-year highs.
Next up is U.S. monthly retail sales at 1230 GMT, which will give a steer on how the U.S. consumer held up in the face of turmoil in the banking sector that brought down two regional lenders and hammered shares in others. Economists polled by Reuters expect retail sales to have fallen 0.4% in March from February.
Money markets are attaching a 69% chance that the Fed will raise interest rates by 25 basis points (bps) next month, although a series of cuts are also being priced in from July through to the end of the year. This would see rates at 4.3% in December, compared with a range of 4.75-5.00% right now.
Atlanta Fed President Raphael Bostic told Reuters in an interview on Thursday that one more 25-bps increase would allow the Fed to close out its cycle of rate rises with some confidence inflation would steadily return to its 2% target. Recent inflation data, including this week's reports of slowing consumer price increases and falling producer price inflation, "are consistent with us moving one more time," he said. "We've got a lot of momentum suggesting that we're on the path to 2%."
In other news, an unexpected surge in Chinese exports, alongside a robust March employment report in Australia, has put the Australian dollar on course for a 1.5% gain this week. It was last down 0.1% at $0.6775. The Australian and New Zealand dollars are often used as more liquid proxies for China's yuan.
The pound hit a 10-month high of $1.2545 earlier in the day, and was flat at $1.2512. Against the euro, it was down 0.2% at 88.43 pence. The Japanese yen rose marginally, leaving the dollar 0.1% down on the day at 132.41, while the offshore yuan rose 0.3% to 6.8517 per dollar. Photo by Jericho, Wikimedia commons.