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The dollar has fallen for the second week in a row as speculators reduce their expectations for a Fed rate hike

Image: Reuters Berita 24 English -The dollar fell for the second week in a row on Friday as traders lowered their expectations for interest ...

Image: Reuters

Berita 24 English -The dollar fell for the second week in a row on Friday as traders lowered their expectations for interest rate hikes by the US Federal Reserve and as rising inflation and consumer expenditure data eased recession fears.

The dollar index, which compares the safe-haven currency to a basket of six other major currencies, hit 101.43, the lowest level since April 25. It was down 1.24 percent on a weekly basis, following a 1.45 percent drop the week before. The dollar was down 0.059 percent at 101.66 at 3:10 p.m. Eastern time (1910 GMT).

"We continue to believe that the best of the broader USD surge is now behind us," Scotiabank strategists wrote in a client note. "While the USD may not fall materially, additional gains seem doubtful."

"The Fed is fully priced," they wrote, adding that "expectations for rate hikes later this year may be revised if the economy weakens more swiftly than predicted."

The dollar rose to a nearly two-decade high over 105 earlier this month, but has since fallen along with expectations for the size of the probable Fed rate hikes this year, which have been spurred in part by fears of out-of-control inflation.

"The dollar is losing altitude as speculation grows that the Fed may pause rate hikes in the fall," said Joe Manimbo, senior market analyst at Western Union Business Solutions.

Most participants anticipated 50 basis-point hikes would be appropriate at the Fed's June and July policy meetings, according to minutes released this week, but many thought hefty, early hikes would offer leeway to pause later in the year to examine whether tighter policy is working to contain inflation.

Inflation increased in April, albeit at a slower pace than in prior months, according to figures released on Friday. After rising 0.9 percent in March, the personal consumption expenditures (PCE) price index rose 0.2 percent, the weakest growth since November 2020. The PCE price index increased 6.3 percent in the year to April after rising 6.6 percent in March.

Benchmark After the April inflation numbers, which encouraged hopes that the worst of mounting price pressures has passed, U.S. Treasury rates were lower on Friday, but briefly rallied off session lows.

Consumer spending in the United States increased more than predicted last month, according to a separate survey, as families increased their purchases of goods and services.

The nonfarm payrolls data for May, which will be released at the end of the week, will be the most important US news next week.

"From the third quarter ahead, the jobs data will offer some information on the scope for tightening," Manimbo said.

The euro has benefited the most from the dollar's slide, but that momentum has slowed as investors assume that much of the European Central Bank's planned rate hikes have already been factored into current levels.

The euro was unchanged for the day at $1.0731, after rising to its highest levels in a month earlier. At $1.2628, sterling was up 0.16 percent.

The risky Australian dollar rose 0.8 percent to $0.7156, while the New Zealand currency rose 0.88 percent to $0.6535.

Better risk sentiment, on the other hand, did not benefit bitcoin, which fell 2.59 percent to $28,426, continuing this week's slow retreat from the psychologically key $30,000 barrier.

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