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Dollar edges lower, but on course for eighth straight winning week
Author
Published Sep 08, 2023 03:07AM ET
© Reuters
Investing.com - The U.S. dollar edged lower in early European trade Friday, but remains on track for an eighth straight winning week as U.S. economic resilience brings further Federal Reserve rate hikes into question.
At 03:10 ET (07:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 104.807, but remains not far from the previous session's six-month high of 105.15.
Further Fed rate hikes ahead?
Data released this week has painted an upbeat picture of the U.S. economy, as the services sector unexpectedly gained steam in August while jobless claims hit their lowest level since February.
The Federal Reserve is still widely expected to hold steady on rates when it meets later this month, but this economic resilience is creating uncertainty about what the Fed might do later this year.
Dallas Federal Reserve Bank President Lorie Logan said on Thursday that while "forecasts are inherently uncertain. My base case, though, is that there is work left to do,"
Her colleague, Federal Reserve Bank of New York President John Williams on Thursday said of the current setting of monetary policy, "it's pretty clear we're restrictive" but it's "still an open question as we go forward."
European economies struggle
By contrast, the economic news out of Europe has been generally more depressing.
Gross domestic product in the eurozone grew just 0.1% in the second quarter compared to the previous three months, with the dominant German manufacturing sector struggling badly.
There was some good news Friday as French industrial production grew 0.8% on the month in July, substantially better than the 0.1% growth expected and the prior month’s drop of 0.9%.
The European Central Bank has raised rates at each of its past nine meetings, but the region’s economic slowdown is pointing to a pause next week even if inflation remains elevated.
EUR/USD rose 0.2% to 1.0715, recovering to a degree having fallen to a three-month low of 1.0686 on Thursday, while GBP/USD rose 0.1% to 1.2483, having also hit a three-month low the previous session.
Chinese yuan falls to lowest level since 2008
In Asia, USD/CNY rose 0.3% to 7.3487, with the yuan slipping to its weakest level against the dollar since February 2008, weighed by rising diplomatic tensions between Beijing and Washington as well as concerns over a Chinese economic slowdown.
USD/JPY traded lower at 147.28, with the yen near a 10-month low after the Japanese government downgraded its initial growth estimate for second quarter gross domestic product.
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