The dollar looks set to end the week down

On Friday, the dollar fell for the first time in a week against major rivals since the beginning of the month, as global risk appetite recovered, while the Japanese yen fell to a three-year low and the price of bitcoin approached $60,000.

The dollar index lost 0.1% to 93.9 and 0.2% for the week, marking the first weekly loss in six weeks. When investors seek safety, the dollar tends to appreciate.

This week, global stock markets soared as fears of a stagflationary economy were alleviated by forecast-beating corporate earnings in the United States. Only versus the yen, another safe-haven currency has the dollar managed to retain its recent gains. Climbing 0.4 per cent on Friday and reaching 114.18 yen for the first time since November 2018.

Analysts said long-dollar investors had been forced out of their positions recently. Inflation statistics did not support additional currency gains.

The lack of any positive surprise in US CPI statistics and confirmation of previous Fed tapering forecasts in the minutes gave no catalyst for fresh USD buying and thus the sell-off,” MUFG analyst Derek Halpenny said. Since early September, the dollar has risen in anticipation that the Federal Reserve will tighten monetary policy more swiftly than previously anticipated, owing to a more robust economy and rising oil prices.

The Fed’s September meeting minutes reveal this week that we are almost expecting tapering of stimulus to begin this year. This is despite officials’ severe disagreements about inflation and what to do about it.

Money markets are currently pricing in a 25 basis point rate hike by July as a 50/50 bet.

Currencies

The release of retail sales numbers later on Friday will provide the following significant indication of the health of the US economy.

The euro rose 0.1 percent to 1.1611 after touching 1.1624 for the first time since September 4 on Thursday.

Sterling gained 0.4 percent to $1.3722 after reaching its highest level since September 24 at $1.3734 overnight.

The risk-averse Australian dollar rose 0.2 percent to $0.7428.

The New Zealand kiwi dollar rose 0.4 percent to $0.7061, adding to Thursday’s 1 percent gain.

In a client note, we close the week with risk flying, wrote Chris Weston. He is the head of research at Melbourne brokerage Pepperstone. Equities are soaring, and the JPY has no place as a hedge.

Bitcoin surged to nearly $60,000, a roughly six-month high, as traders were increasingly hopeful that US authorities would authorize the launch of an exchange-traded fund based on its futures contracts.