The US dollar was little changed to slightly lower against major currencies on Friday, as business activity data suggested that the world’s largest economy remained resilient, supporting expectations of another 25 basis-point interest rate increase by the US Federal Reserve at next month’s policy meeting.
The US dollar index, which measures the performance of the US currency against six others, dropped 0.11 percent to 101.72, but rose 0.17 percent from a week earlier, posting its first weekly gain in nearly two months on rate increase expectations.
Data on Friday showed that S&P Global’s flash US Composite PMI Output Index, which tracks the manufacturing and services sectors, increased to 53.5 this month — the highest since May last year — following a final reading of 52.3 last month. It was the third straight month that the PMI remained above 50, indicating growth in the private sector.
Photo: Reuters
“Although economic activity is cooling, rate differentials are still dollar-supportive, and the US remains the cleanest dirty shirt on the global economic landscape,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
In the case of the euro, a surprising recovery in the eurozone economy this month underpinned the currency.
However, the greenback’s outlook remained tilted to the downside as investors braced for the end of the Fed’s tightening cycle. Fed officials have been at pains to point out that inflation remains uncomfortably high and rates must keep rising.
Money markets on Friday continued to show expectations of a quarter-point US rate hike next month, which is US dollar-positive, followed by a pause in June. The rate futures market has also priced in rate cuts this year as the economy slows.
The New Taiwan dollar lost ground against the US dollar on Friday, declining NT$0.010 to close at NT$30.622, down 0.52 percent from a week earlier.
The euro rose 0.19 percent against the greenback to US$1.0992, recovering from a session low of US$1.0938, while sterling dipped 0.02 percent to US$1.2440, having dropped by as much as 0.54 percent earlier on.
The yen was one of the stronger performers earlier in the session, rising to a one-week high against the US dollar, amid data showing that Japanese consumer inflation held steady above the central bank’s target last month. That has put pressure on the Bank of Japan to ditch its ultra-loose monetary policy stance.
The US dollar was 0.08 percent lower against the Japanese yen at ￥134.14.
Additional reporting by CNA, with staff writer
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