Dollar falls as investors square positions after strong gains

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The dollar fell to its lowest in more than a week on Friday, as investors consolidated gains after a strong rally against most currencies, awaiting a report. on US inflation that could determine the magnitude of the Fed’s rate hike at this month’s policy meeting.

For the week, the dollar index , which tracks the value of the greenback against six major currencies, posted its first weekly drop in the last four on Friday.

“Markets are getting a little nervous at really historic levels, so the market decided not to push dollar strength at this juncture and lightened positions,” said Greg Anderson, global head of currency strategy at BMO Capital. Markets in New York.

This week, the greenback soared to a 24-year high against the yen and a 37-year high against the British pound, with the dollar index rising to a more than 20-year high.

On Friday, the dollar index fell to 108.35 and was then down 0.5% at 108.96.

Capital Economics expects the CPI to continue to decline.

“We believe the decline in US inflation is in line with our view that the environment remains supportive for the dollar as it benefits from higher real rates as the global economy slows,” wrote Jonathan Petersen, Senior Markets Economist at Capital Economics, in his latest research note.

One of the big winners was the euro, which rose as much as 1.2% to hit a three-week high of $1.0114, a day after the European Central Bank raised its key interest rate by an all-time high. of 75 basis points (bp).

The last time it rose it was 0.5% to $1.0045.

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Europe continues to face a weak economic outlook, with skyrocketing energy prices putting pressure on consumers and businesses. European Union energy ministers were divided on Friday over whether to cap Russian gas prices as they met to work out measures to protect citizens.

Currencies perceived as riskier bets also benefited from an improvement in market sentiment at the end of the week, which was reflected in gains in European and US stocks.

Sterling gained 0.8% to $1.1592 after a modest drop the day before following the death of Queen Elizabeth.

The Bank of England said on Friday it would delay its next monetary policy meeting by a week due to the period of mourning for the monarch.

The Japanese yen posted its best daily gain in a month, rising 1% to 142.675 yen per dollar, while pulling away from recent 24-year lows.

Bank of Japan Governor Haruhiko Kuroda said on Friday that a rapid move in the yen was undesirable, following a meeting with Prime Minister Fumio Kishida.

The Australian dollar also posted its best daily gain in a month. Even battered cryptocurrencies advanced at the expense of the dollar, with rising more than 10% to $21,300.

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