Dollar rally evaporates as US data undermine rate-rise bets

18/04/2015 00:49 AST

The dollar declined, extending weekly losses against its major counterparts, as signs of slowing momentum in the US economy undermined the prospects of an early increase in interest rates.

The greenback fell versus all of its 16 major peers this week after below-forecast readings for American housing, factories and retailers added to concern about the labour market. Australia’s and New Zealand’s currencies advanced this week as crude oil headed for its biggest weekly gain in more than four years.

“We have been seeing some consolidation given the weaker tone to the US data, a lot of the appreciation we have seen has petered off,” said Phyllis Papadavid, a senior foreign- exchange strategist at BNP Paribas SA in London. “The uptrend will resume and it will coincide with an improvement in second- quarter data. We are still sticking with our forecast of parity in euro-dollar by the end of the year.”

The dollar weakened 0.6 per cent to $1.0823 per euro as of 6:39am New York time, extending this week’s decline to 2 per cent. The greenback depreciated 0.3 per cent to 118.64 yen, having slipped 1.3 per cent since April 10.

The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, headed for a 1.9 per cent drop this week, falling to 1,180.98 Friday. It climbed 1.8 per cent in the five-day period through April 10, the first weekly gain since closing at 1,222.12 on March 13, the highest level in data going back to 2004.

Steepest Declines

The US dollar’s biggest declines versus its developed- nation peers this week came against so-called oil currencies, with losses of 4.7 per cent against Norway’s krone and 3.5 per cent versus Canada’s loonie.

“The market is primed now to weaken the dollar,” said Stuart Bennett, head of Group-of-10 currency strategy at Banco Santander SA in London. “Once you lose momentum, then a lot of people are thinking maybe we shouldn’t see this as a one-way bet.”

Seventy-one per cent of participating economists surveyed by Bloomberg forecast the Federal Reserve’s first rate increase in almost a decade will come at its September meeting. That’s up from 32 per cent in last month’s survey. The camp calling for a June move shrank to 12 per cent from 45 per cent in March.

Bloomberg