Home The Watchforex news U.S. Dollar logs modest weekly gain as bulls hope for summer hike

U.S. Dollar logs modest weekly gain as bulls hope for summer hike

by Yomna Yasser

The U.S. dollar strengthened on Friday against its main rivals, on track to log a modest weekly gain as bullish investors held out hope that the Federal Reserve would raise interest rates in July or September.

The ICE U.S. Dollar index a measure of the buck’s strength against a basket of six rivals, was up 0.6% at 94.5400, on track for a weekly gain of 0.5%.

The euro traded at $1.1258 late Friday in New York for a weekly decline of 0.9%. It bought $1.1310 late Thursday.

Against its Japanese counterpart, the greenback bought ¥106.75 late Friday, notching a weekly gain of 0.2%. It traded at ¥107.05 Thursday,

The pound finished off a disastrous week by falling sharply Friday afternoon after a new poll showed 55% of U.K. voters favor leaving the European Union. It briefly touched an eight-week low of $1.4180, before trimming its decline slightly. One pound bought $1.4267 late Friday in New York, for a weekly drop of 1.7% — its sharpest tumble since Feb. 26. By comparison, the British currency traded at $1.4466 late Thursday.

The dollar came under pressure after official data released late last week showed U.S. jobs growth slowed sharply in May. On Monday, Chairwoman Janet Yellen said the central bank needs to wait for more data to determine whether the weak May report was an anomaly or signaled deeper issues, sparking further declines in the dollar.

But the currency strengthened after a separate strong reading on job openings and a fall in the number of workers filing for first-time unemployment benefits restored some faith in the labor market. The dollar did pare its gains slightly after a survey by the University of Michigan showed consumer sentiment dipped in June.

In theory, higher interest rates should cause the dollar to strengthen by increasing the return on dollar-denominated accounts and assets.

While the dollar traded in a tight range for most of this week, that could change after the Federal Reserve’s June policy meeting, which ends Wednesday.

While few expect the central bank to cut rates next week, the tone of its monetary statement and projections could spark a large move in the dollar, said Christopher Vecchio, a currency analyst at DailyFX.

“Being in the market right now is like sitting on the beach after a day in the sun, but knowing full well that there are dark storm clouds approaching quickly on the horizon; it’s a matter of time before the downpour begins,” Vecchio said.

Meanwhile, the Central Bank of Russia lowered its key interest rate to 10.5% from 11%, its first cut in nearly a year, sparking a selloff in the ruble USDRUB, +1.7152%

The Canadian dollar briefly turned higher against its U.S. rival after official data showed strong jobs growth in Canada last month. But falling oil prices quickly helped the currency erase all of its gains. The loonie bought 78.38 cents late Friday, compared with 78.58 cents late Thursday.

Source: MarketWatch

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