SINGAPORE, April 14 (Reuters) – The dollar headed for its longest stretch of weekly losses in nearly three years on Friday, as traders boosted expectations of a near end to the US Federal Reserve’s rate-hiking cycle after signs of a possible cooling in inflation.
Data on Thursday showed that US wholesale prices, as measured by the producer price index (PPI), fell last month by the most in almost three years, a day after data showed the consumer index – CPI – also fell in line with expectations.
The dollar index, which measures the US currency’s performance against six others, slipped to a near year-low of 100.78.
Last flat at 101.0, it is heading for a weekly decline of more than 1%, its steepest decline since January. That would be a fifth straight weekly loss, the longest such streak since July 2020.
“The CPI rise was close to expectations, so it’s a significant market reaction for a fairly consensual result, and I think that’s a measure of how negative sentiment on the dollar is right now,” said Adam Cole, chief currency strategist named by RBC Capital Markets.
“It’s pretty hard to fight that, even if you don’t really agree with it, which we don’t do,” he said.
RBC Capital Markets has a year-end target of $1.03 for the euro/dollar pair, which traded around $1.1061 on Friday, up 0.1% on the day and a year-high.
Of the G10 currencies, investors hold the largest bearish position in the dollar versus the euro.
Weekly data from the Commodity Futures Trading Commission shows money managers combined to have a long position of $19.631 billion.
“The easiest way to express a negative view of the dollar was in the euro,” said Ray Attrill, head of FX strategy at National Australia Bank.
The next data point for investors is US monthly retail sales at 1230 GMT, which will shed light on how the US consumer has held up amid the banking sector turmoil that has brought down two regional lenders and hammered the shares of others.
Economists polled by Reuters expect retail sales to have fallen 0.4% in March from February.
Earlier in the day, the pound hit a 10-month high of $1.2545 and was last down 0.3% to $1.2492. Against the euro, it fell 0.3% to 88.48 pence.
Money markets rate a 69% chance that the Fed will hike rates by 25 basis points (bps) next month, although also pricing in a series of cuts from July through the end of the year, taking rates to 4.3 would % in December, compared to a current range of 4.75-5.00%.
Atlanta Fed President Raphael Bostic told Reuters in an interview on Thursday that another 25 basis point hike would allow the Fed to end its cycle of rate hikes with some confidence that inflation would steadily return to its 2% target .
Recent inflation data, including this week’s reports of slowing consumer inflation and falling producer price inflation, “are consistent with our renewed movement,” he said. “We have a lot of momentum which suggests we’re on our way to 2%.”
Meanwhile, an unexpected surge in Chinese exports coupled with a robust jobs report in Australia has pushed the Australian dollar up 1.5% this week. It was last down 0.1% to $0.6775. The Australian and New Zealand dollars are often used as more liquid proxies for China’s yuan.
The New Zealand dollar slipped 0.3% to $0.6281 after rising 1.3% on Thursday.
The Japanese yen was unchanged, steadying the dollar at 132.59, while the offshore yuan rose 0.3% to 6.8515 per dollar.
Reporting by Rae Wee; Editing by Christopher Cushing
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