US dollar posts second-steepest weekly fall

THE dollar posted its secondsteepest weekly decline versus other major currencies this year on Friday (Nov 17), while the yen strengthened sharply, and the dollar traded below 150 yen, as concerns grow about the weakening global economic outlook.

Cooler-than-expected US inflation data hastened market expectations for how soon the Federal Reserve will cut rates.

Such a move would weaken a major dollar support and could come as early as next year’s first quarter.

The dollar index, which measures the greenback against six other major currencies, slid to lows last seen on Sep 1, while the yield on benchmark 10-year Treasury notes fell to a two-month low of 4.379 per cent.

The dollar index fell 0.49 per cent on the day, hitting a low of 103.85 that increased the greenback’s decline over the past five days to almost 1.8 per cent – its biggest weekly drop since mid-july.

The euro rose 0.52 per cent to US$1.0906 after Eurostat data confirmed year-on-year inflation in the eurozone slowed sharply in October.

The yen – punished broadly this year by dollar strength – broke the 150 mark for the first time in nearly two weeks, gaining 0.69 per cent to 149.68 to the dollar. The US currency is down about 1.4 per cent versus the Japanese currency since Monday.

Japanese authorities do not have specific exchange-rate levels in mind when deciding when to intervene in the currency market, Deputy Finance Minister Ryosei Akazawa told parliament on Friday.

The yen’s strength reflected the fact that “contracting growth concerns are rising” globally, said Lee Hardman, currency analyst at MUFG, adding that Japanese terms of trade were less impacted by falling energy prices.

Weaker-than-expected retail sales figures in Britain added to a slew of negative readings during the week, but sterling nudged higher to US$1.2458, up 0.42 per cent on the day.

Sluggish data globally has raised concerns about economic prospects, but also suggests that central banks may be winning in their fight against soaring prices.