US dollar reverses some losses – economic data supports

The US dollar appears to have reversed some of its recent losses early in Friday’s session, supported by positive economic data from the housing sector and the labor market as well as a slight rise in US Treasury yields. At the time of this writing, the DXY US Dollar Index is trading at around 93.64.

However, despite these gains, the dollar index is expected to end this trading week in the red, recording a loss of 0.18% so far this week. The greenback’s weakness was driven by weak economic data earlier in the week, even as optimism that the Fed would be the first central bank to implement monetary tightening measures then subsided. that other economies were also demonstrating a possible intervention to combat high inflation.

In the previous session, benchmark 10-year US Treasury yields rose to 1.7% but have since declined slightly. However, investor sentiment towards the greenback is weakening despite the Fed preparing to start reducing its monthly asset purchases from November. Previously, analysts had forecast the US dollar to rise in the current quarter amid growing hopes that the Fed will tighten monetary policy sooner and may be one of the first major central banks to implement a hike. rates.

Expectations have eased this week after the BOE governor hinted at a possible UK rate hike soon to offset continued high inflation. At the same time, New Zealand also reported a sharp rise in consumer inflation a few days ago, raising expectations for faster rate hikes and monetary tightening from the RBNZ.

Meanwhile, investor profit taking caused major commodity currencies CAD and AUD to fall against the USD. The massive sales of these currencies could have been triggered by China’s decision to intervene to contain the surge in energy prices, which could lead to a correction in the prices of key commodities such as crude oil and oil. coal, the main exports from Canada and Australia respectively.

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