by Rai V
SINGAPORE (Reuters) – The dollar was on course for its longest weekly winning streak in nine years on Friday, boosted by a resilient round of US economic data that also raised questions about the end of the Federal Reserve’s rate-hike cycle.
In Asia, traders were keenly watching movements in the Chinese currency after the onshore yuan fell to a 16-year low in the previous session.
The US dollar index, which measures the greenback against its major rivals, held steady at 105.02 in early trade, not far from the previous session’s six-month high of 105.15.
The index is on track to extend its gains for the eighth consecutive week and is up 0.7% so far.
The euro, the dollar index’s biggest constituent, was trading in losses for eight consecutive weeks, after falling to a three-month low of $1.0686 on Thursday, while the single currency was marginally up at $1.0701.
Ray Attrill, head of FX, said, “The story this week was about the resilience seen in the data… The psychology of the market is that things look a lot better in the US than anywhere else in the world.” Strategy at National Australia Bank.
Data this week showed the US services sector unexpectedly accelerated in August and jobless claims fell last week to their lowest level since February, while in the euro zone, Germany, Europe’s biggest economy, Industrial production fell slightly more than expected in July.
“Comparing the current development fundamentals of Europe and the US, the US still looks better,” Attrill said.
Sterling was similarly close to Thursday’s three-month low and was last bought at $1.2484, setting a weekly loss of more than 0.8%.
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The offshore yuan rose 0.05% to 7.3379 per dollar, but was not far from its 10-month low of 7.3490 hit in August. It is on track for a weekly loss of about 1% against the dollar, its worst week in nearly a month.
China’s yuan has declined steadily since February as a faltering economic recovery after the pandemic and a widening yield gap with other economies, especially the United States, hit capital flows and trade.
The onshore yuan, which touched its weakest level since 2007 on Thursday, has fallen nearly 6% against the dollar so far this year and has become one of the worst-performing Asian currencies along with its offshore counterpart .
Head of Asia Alvin Tan said, “I expect USD/CNY to rise to 7.50 by mid-2024 as no major fiscal stimulus is forthcoming, and thus monetary policy will continue to share part of the burden of supporting the economy.” will be.” FX Strategy at RBC Capital Markets.
The yuan’s sharp decline has prompted authorities to take steps to slow the pace of its depreciation.
The Australian dollar, which is often used as a liquid proxy for the yuan, was last up 0.07% at $0.6381, but posted a weekly loss of more than 1%.
The New Zealand Dollar was similarly on track to lose around 0.9% for the week and was last bought at $0.5890.
Also on traders’ radar was the struggling yen, which rose 0.15% to 147.06 per dollar but remained on the weaker side of the key 145 level, which prompted Japanese authorities to intervene last year.
While officials have stepped up their tough efforts to protect the yen, they have also continued to stress the need to maintain the Bank of Japan’s extremely loose monetary policy.
(Reporting by Rai V; Editing by Mr Navaratnam)
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