Author: Chibuike Oguh
NEW YORK (Reuters) – The U.S. dollar rebounded from its highest level in two years on Friday but headed for a third straight week of gains, with data showing inflation slowing two days after the Federal Reserve cut interest rates and showing inflation was moderate. stubborn to limit cuts in 2025
The dollar fell 0.72% against a basket of six other currencies at 107.64 before settling at 108.54 – its highest level since November 2022. It was expected to end the week up 0.72%.
Commerce Department data showed the personal consumer spending price index – the Fed’s preferred measure of inflation – rose 0.1% in November after an unadjusted 0.2% gain in October.
However, in the 12 months to November, the PCE price index increased by 2.4%, compared with a 2.3% augment in the year to October.
The Fed cut interest rates by 25 basis points on Wednesday, and officials indicated there would be fewer cuts in 2025 as inflation remains above its target range despite a recent downward trajectory.
The benchmark 10-year U.S. bond yield fell 6.2 basis points to 4.51%, after hitting a 6.5-month high following the Fed’s interest rate decision.
“Today’s inflation data was more benign than feared; During this week’s meeting, the Fed focused again on inflation and then the data was no longer so worrying,” said Adam Button, chief currency analyst at ForexLive.
“I think the market heard the Fed’s words and became concerned about inflation. However, the numbers show that it is still slowing down, and certainly not at a worrying level.
The U.S. government will begin a partial shutdown if Congress does not extend the deadline to pass a budget bill backed by President-elect Donald Trump by midnight on Friday. The bill failed to pass in the House of Representatives on Thursday.
The dollar weakened 0.79% to 0.892 Swiss francs, heading for a weekly loss.
The euro strengthened after falling to a one-month low of $1.03435 during the session, marking a third straight week of losses, partly driven by Trump’s comments that the European Union needs to buy more U.S. oil and gas to make up for it loss of its “huge deficit” against the world’s largest economy or threaten it with tariffs. It was last up 0.76% at $1.044175.
The dollar fell to a five-month low of 157.93 Japanese yen after the Bank of Japan left interest rates unchanged. It was last down 0.89% at 156.01 yen.
Sterling fell to a one-month low of $1.2475, but was last up 0.77% at $1.25990, marking its third straight week of losses. The Bank of England left interest rates unchanged on Thursday.
On the offshore market, the dollar weakened by 0.18% to 7.295. The Australian dollar weakened 0.43% to $0.6263, while the New Zealand dollar strengthened 0.53% to $0.566.
“Basically, there is a difference in interest rates between Wednesday’s Fed meeting and it’s not about what they did, but the catalyst was a change in economic forecasts for the Fed funds rate next year,” said Joseph Trevisani, senior analyst at FXStreet.com.
“The market sees the Fed pulling back. I’ve long thought he’d take a break in January. I’m pretty sure that will happen.”
Currency offer prices as of December 20 at 18:57 GMT
Description RIC Latest US Close Previous session Change percentage from the beginning of the year Pct High rate Low rate
Dollar Index 107.66 108.43 -0.7% 6.20% 108.54 107.58
Euro/Dollar 1.0438 1.0364 0.72% -5.43% 1.0445 USD 1.0344
Dollar/Yen 156.09 157.335 -0.77% 10.69% 157.875 155.975
Euro/Yen 162.93 163.13 -0.12% 4.69% 163.66 162.36
Dollar/Swiss 0.892 0.8987 -0.76% 5.97% 0.899 0.8917
Pound sterling/dollar 1.2595 1.2503 0.76% -1.01% 1.2613 $1.2475
Dollar/Canadian 1.4361 1.4399 -0.25% 8.35% 1.4435 1.4336
Australian/Dollar 0.6263 0.6238 0.46% -8.1% 0.6274 USD 0.6215
Euro/Switzerland 0.9308 0.9312 -0.04% 0.24% 0.9319 0.9287
Euro/pound sterling 0.8284 0.8287 -0.04% -4.43% 0.8313 0.8272
New Zealand dollar/dollar 0.566 0.5631 0.55% -10.4% $0.5672 0.5615
Dollar/Norway 11.3073 11.4263 -1.04% 11.57% 11.4726 11.3077
Euro/Norway 11.8051 11.856 -0.43% 5.18% 11.892 11.8072
Dollar/Sweden 11.0032 11.0238 -0.19% 9.3% 11.0608 10.9884
Euro/Sweden 11.4869 11.4283 0.51% 3.25% 11.4929 11.431
