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Dollar near one-month low, set for worst weekly showing since May

Economy30 minutes ago (Jul 30, 2021 02:41AM ET)

(C) Reuters. FILE PHOTO: A trader shows U.S. dollar notes at a currency exchange booth in Karachi, Pakistan December 3, 2018. REUTERS/Akhtar Soomro

By Swati Pandey

SYDNEY (Reuters) – The dollar languished near a one-month low on Friday and was poised for its worst weekly performance since May as dovish remarks by the U.S. Federal Reserve together with underwhelming economic data took the steam out of a month-long rally.

The dollar index, which measures the greenbackagainst a basket of six other currencies, was last at 91.96 after going as low as 91.855 on Thursday, a level not seen since June 29.

For the week, the index is off 1%, its worst weekly showing since early May. For the month, the index is down 0.5% so far following a 2.8% rally in June.

The dollar’s downtrend began after Fed Chairman Jerome Powell wrong-footed bulls following a policy meeting this week by saying that rate increases were “a ways away” and the job market still had “some ground to cover”.

“While the Fed continued to say it was moving towards winding back its money printing program, the Fed’s move towards this shift looks likely to be slower than previously anticipated,” said Steven Dooley, currency strategist at Western Union (NYSE:WU) Business Solutions.

“The Fed’s caution is seen due to a slowdown in U.S. growth, easing in inflation and worries about the Delta variant,” Dooley added.

The dollar found little support overnight from U.S. gross domestic product numbers.

While the U.S. economy expanded at a 6.5% annualised rate in the second quarter, boosted by massive government aid, growth fell short of economists’ expectations for an 8.5% acceleration.

The dollar held near a two-week low against the safe haven Japanese yen at 109.54.

The euro climbed to a one-month high against the dollar to be last at $1.1880 ahead of preliminary second quarter gross domestic product data for France, Germany, Italy and the euro area as well as preliminary July inflation prints for France, Italy and the euro area. The euro area also gets June unemployment data.

Elsewhere, the Chinese yuan has recovered most of its Tuesday plunge at 6.4645 per dollar.

Sentiment was helped by China’s attempt to calm frayed investor nerves by telling foreign brokerages not to “overinterpret” its latest regulatory actions.

Both the Australian and New Zealand dollars, reliant on world and Chinese economic growth, hovered near two-week highs.

The British pound hovered near its highest in over a month helped by the U.S. dollar’s weaker tone and a fall in coronavirus cases in Britain.

Investors will keep a close eye on a bunch of U.S. macro indicators due later in the day including second-quarter employment cost index, personal income and spending for June and the University of Michigan consumer sentiment index for July.

Dollar near one-month low, set for worst weekly showing since May

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