Dollar rise dominates even as kiwi hops higher with inflation
The dollar was headed for its best weekly gain in about a month on Friday, supported by investors’ drift toward safety as rising COVID-19 infections loomed over the pandemic recovery, while a hot inflation reading sharply lifted the New Zealand dollar.
The kiwi was the biggest mover amongst majors in the Asia session, and was last up 0.6% at $0.7020, after consumer prices rose far faster than expected, bringing forward markets’ rate hike expectations to August.
Solid U.S. data and a shift in interest rate expectations after the Federal Reserve flagged sooner-than-expected hikes in 2023 have put a floor under the greenback over the past month and made investors nervous about shorting it.
The dollar was broadly steady elsewhere on Friday but heading for weekly gains, with a rise over the week so far of roughly 0.5% against the euro and sterling and 0.7% against the risk-sensitive Australian dollar.
The U.S. dollar index, which measures the greenback against a basket of currencies, was flat at 92.562 on Friday and up 0.5% for the week, which if sustained would mark its biggest weekly percentage gain since the week ended June 20.
Ahead on Friday, traders are looking to U.S. retail sales data and consumer confidence for any reading on inflation and the strength of the recovery.
Bond rally
The mood across financial markets has been jittery for a couple of weeks as virus infections are surging.
Treasuries have rallied for a third week in a row with no obvious catalyst but in tandem with worries that the new infections could dent recovery progress, that slowing Chinese growth puts the brakes on global growth and that U.S. inflation looks transitory, or at least under central bankers’ control.
It last bought 109.99 per dollar and 129.88 per euro. The euro stood at $1.1808, not far above the three-month low of $1.1772 it tested during the week.
Sterling traded at $1.3835 in Asia, having handed back some of a bounce that came with strong jobs figures and hawkish comments on Thursday from Bank of England policymaker Michael Saunders.
The Thai baht, among the currencies most battered by the pandemic’s resurgence, sat at a three-month low and tracked toward a fifth consecutive weekly loss as the tourism-dependent country posted record infections.
Cryptocurrencies found support but were perilously close to the bottom of recent ranges with bitcoin at $31,947 and ether at $1,947.
Reference: CNBC
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