US dollar set for fourth straight weekly rise against euro and yen
The dollar was heading for a fourth straight weekly rise against the yen and the euro but remained significantly below its level from before April 2, when U.S. President Donald Trump announced aggressive tariffs on imports.
A U.S.-China trade truce propelled the dollar higher on Monday, though the euphoria soon fizzled out as it dropped on Tuesday and Thursday after U.S. data.
The greenback was little changed on Friday after retreating earlier in the session on declining U.S. Treasury yields as weak economic data prompted investors to raise bets of interest rate cuts by the U.S. Federal Reserve.
"The dollar short-term rates relationship has loosened in the past two months, but the market's bearish U.S. dollar tendency means further dovish repricing could prove to be the catalyst for fresh dollar short building," said Francesco Pesole, rates strategist at ING.
Markets are now indicating 59 basis points (bps) worth of Fed easing by December following Thursday's data, up from 49 bps previously. They have also priced in a 40% chance of a 25 bps rate cut by July.
The benchmark 10-year U.S. Treasury yield dropped 5 bps to 4.41%. The two-year yield fell 3.5 bps to 3.94%.
The euro rose 0.15% to $1.1205 but was on track to end the week 0.38% lower. On April 1, it closed at $1.0793.
The single currency ranked among the best performers in March after Germany announced massive investments, and again in April, when the U.S. tariff announcement triggered a brief but sharp selloff in U.S. assets, casting doubt on the dollar's safe-haven status.
U.S. equity funds attracted the first inflows in five weeks in the week to Wednesday, Bank of America Global Research said.
Against a basket of currencies, the dollar fell 0.05% to 100.73, although it was on track for a 0.3% weekly gain, supported by a sharp 1.3% rise on Monday.
Market focus could now shift to U.S. fiscal policy, as concerns about extreme tariffs temporarily subside, with negotiations set to continue with China and Europe.
"The U.S. cannot close its very large current account deficit unless it closes its fiscal deficit too," said George Saravelos, head of forex research at Deutsche Bank, which the U.S. appears unwilling to do.
Republicans hold a narrow 220-213 House majority, and will need to stay united to pass fiscal measures that Democrats are criticising as hurting social programmes.
The greenback dropped 0.12% versus the yen to 145.48 on Friday and was set for a weekly rise of 0.10%, after last week's downbeat GDP data in Japan and dovish remarks from a Bank of Japan policymaker. It was at 149.71 on April 1.
Investors also had their eye on potential talks between Tokyo and Washington next week, during which the two sides could discuss the topic of foreign exchange.
Most of the action in the foreign exchange market in Asian trading came from the dollar's moves against the South Korean won, where it fell sharply for a second straight day on news that Washington and Seoul discussed the dollar/won market earlier this month.
The moves were reminiscent of a similar episode in the Taiwan dollar earlier this month.
The dollar last traded 0.10% lower at 1,391 won.
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