Money markets are attaching a 69% chance the Fed will raise interest rates by 25 basis points 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. Adding to signs that global inflationary pressure is waning was an unexpected surge in Chinese exports, which in March shot up 14.8% from the same month a year earlier, stunning economists who had predicted a 7.0% fall in a Reuters poll. The upbeat Chinese data, 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 0.2% at $0.6772, The Australian and New Zealand dollars are often used as more liquid proxies for China's yuan. "It was almost like a perfect positive storm for the Aussie," NAB'S Attrill said. "Starting with the employment numbers ... and the China trade numbers which looked exceptionally good." "You layer on top of that, the dollar weakness from the data last night and positive risk sentiment, and it was a (raft) of good news for the Aussie." The New Zealand dollar rose 0.1% to $0.63035, after jumping 1.3% on Thursday. The Japanese yen rose marginally, leaving the dollar 0.2% down on the day at 132.27, while the offshore yuan rose 0.4% to 6.8463 per dollar. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Rae Wee in Singapore; Editing by Christopher Cushing and Christina Fincher)
(Updates throughout)
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
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 down 0.1% at 100.90, 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 $1.1058,
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 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.
Similarly, 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 88.39 pence.
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