Tokyo (Reuters) – The U.S. dollar fell against its major rivals on Friday, putting it on track for its first weekly drop this month. Investors are trying to figure out where the Federal Reserve will go with policy and if aggressive rate hikes will cause a recession.
The dollar index, which compares the US dollar to six other currencies, fell 0.07 percent to 104.33 in the Asian morning.It fell after rising 0.19 percent the day before.This was mostly because the euro went down after weak factory data in Europe made people less likely to bet on the European Central Bank’s tightening.
This week, trading in the dollar has been choppy, and the markets now expect the Fed to be more cautious after another expected 75 basis point rate hike in July.
Fed Governor Michelle Bowman said on Thursday that she backs 50 basis point hikes for “the next few” meetings after July’s. Jerome Powell, the chair of the Federal Reserve, told Congress on the second day of his testimony that the central bank is “unconditionally” committed to taming inflation, even when there are risks to growth.
Fears of a recession have kept Treasury yields low, which is bad for the dollar. Overnight, the yield on the 10-year note fell to its lowest level in two weeks. [US/]
The dollar lost 0.1% of its value against the yen, which is very sensitive to changes in U.S. yields. It was down about the same amount for the week and was about to snap a three-week winning streak of 6.19 percent.
The euro went up 0.11 percent to $1.0533, but it had dropped 0.44 percent the night before because German and French PMI numbers were worse than expected.
On Thursday, Germany turned on the “alarm stage” of its emergency gas plan because Russian supplies were going down.
Ken Crompton, an interest-rate strategist at National Australia Bank (OTC: NABZY), said on a podcast that the market has started to cut prices for the next two ECB meetings by a fair amount.
“There have been a few things that have really added up and started to make people wonder how far the ECB will be able to go with its tightening.”
Nonetheless, the euro is up 0.44 percent against the dollar this week.
Sterling rose 0.16 percent to $1.2281, putting it on track for a weekly gain of 0.5 percent, which would end a three-week losing streak.
Australia’s dollar went up 0.13 percent to $0.6904, but it was still going to go down 0.48 percent for the week, making it the third week in a row that it went down.