(Updates prices)
By Amanda Cooper
LONDON, April 14 (Reuters) - The dollar headed for its
longest stretch of weekly losses in almost three years on
Friday, as traders ramped up expectations of an imminent end to
the U.S. Federal Reserve's rate-hike cycle following signs that
inflation may be cooling.
Data on Thursday showed U.S. wholesale prices, as measured
by the producer price index (PPI), fell by the most in nearly
three years last month, a day after data showed the consumer
index - CPI - was also softening 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 flat at 101.0, and was headed for a weekly
decline of more than 1%, its steepest drop since January. This
would mark a fifth straight weekly loss, the longest such
stretch since July 2020.
"The CPI rise was close to expectations, so it's a
significant market reaction for what was a fairly consensus
outcome and I think that is a measure of how negative sentiment
is on the dollar at the moment," RBC Capital Markets chief
currency strategist Adam Cole said.
"It’s kind of hard to fight that, even if you don’t really
agree with it, which we don’t," he said.
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. Out of the G10 currencies, investors hold the largest
bearish position in the dollar against the euro.
Weekly data from the Commodity Futures Trading Commission
shows 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," Ray Attrill, head of FX strategy at National
Australia Bank, said.
The next data point for investors are 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.
The pound hit a 10-month high of $1.2545 earlier in
the day, and was last down 0.3% at $1.2492. Against the euro , it was down 0.3% at 88.48 pence.
Money markets are attaching a 69% chance the Fed will raise
interest rates by 25 basis points (bps) next month, though a
series of cuts are also being priced in from July through to the
end of the year, which 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%."
Meanwhile, 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 New Zealand dollar eased 0.3% to $0.6281, after
having jumped 1.3% on Thursday.
The Japanese yen was flat, leaving the dollar at
132.59, while the offshore yuan rose 0.3% to 6.8515 per
dollar.
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(Additional reporting by Rae Wee in Singapore; Editing by
Christopher Cushing, Christina Fincher and Alex Richardson)
