THE dollar slipped for a second straight session yesterday as recent economic data and a drop in oil prices cooled expectations for Federal Reserve rate hikes, although the yen remained in territory that left it primed for an intervention.
Despite the recent declines, the greenback was still up for the week and on pace for its strongest monthly percentage gain since March after hitting a 13-month high earlier in the week.
Thursday’s data showing a key measure of US inflation met economists’ expectations and easing oil prices, down about 4 per cent yesterday, have moderated rate-hike bets slightly.
Markets are still pricing in an increase in rates of roughly 25 basis points from the Fed this year, according to LSEG data.
The dollar had kicked off the week with three straight days of gains, continuing an uptrend that began the prior week after a policy statement from the Fed, and first under new Chairman Kevin Warsh, was largely seen as hawkish by market participants.
Yesterday, the University of Michigan’s Surveys of Consumers said its Consumer Sentiment Index increased to a final reading of 49.5 this month, slightly below the 50.0 estimate of economists polled by Reuters, from 44.8 in May, although concerns about inflation remain.
The dollar index, which measures the greenback against a basket of currencies, fell 0.39pc, on track for its biggest drop since June 11, to 101.11, with the euro up 0.43pc at $1.1418. The two-day drop of 0.44pc for the dollar would mark its largest since early May.
Sterling strengthened 0.24pc to $1.3223 but was on track for a second straight weekly decline.
Against the Japanese yen, the dollar weakened 0.12pc to 161.59. Crossing the 161.96 mark would take the Japanese currency to its weakest level since 1986. For the week, the greenback is up 0.21pc and poised for a second straight weekly advance. Data showed yesterday that core inflation in Tokyo accelerated in June, providing additional support for the yen.
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