US dollar falls for day 2, but outlook remains positive

NEW YORK / LONDON, Oct. 1 (Reuters) – The dollar fell for a second straight session on Friday, following the decline in U.S. Treasury yields, as investors reduced their positions after recent large gains, although the decline was been considered temporary.

Yields on 10-year US Treasuries were last at 1.484%, down four basis points.

For the week, the dollar index was on track for its biggest percentage gain since late August, as investors considered reducing asset purchases by the Federal Reserve in November and a possible rate hike to the end of next year.

“The Fed became unequivocally belligerent at the September meeting. It also raised inflation expectations, which are actually higher than consensus expectations, which tells you that they are probably more nervous about the future. inflation than they suggest, ”Mazen Issa said. , Senior Currency Strategist at TD Securities in New York.

“We expect Treasury yields to rise further and within that framework, we expect real yields to do the heavy lifting and this is notable for the dollar. It will certainly be a real rate safeguard carried out. by the United States, which should be positive for the dollar. “

Cautious market sentiment over COVID-19 concerns, swings in China’s growth, and a deadlock in Washington ahead of a looming deadline to lift the US government borrowing limit has bolstered the dollar, considered as a safe haven asset.

By mid-morning, the dollar index slipped 0.3% to 94.047, after gaining 0.8% this week, the biggest weekly gain since late August.

Friday’s US data batch was mixed, adding to dollar weakness ahead of the weekend.

US consumer spending rose more than expected in August, posting an increase of 0.8%, but consumption was weaker than initially expected in July, falling 0.1% instead of increasing 0.3% .

Inflation has remained high, but not by much. Core inflation, as measured by the personal consumption expenditure (PCE) price index, excluding the volatile components of food and energy, rose 0.3% in August, unchanged from in the previous month. Read more

In the manufacturing sector, the data was more optimistic. The Institute for Supply Management (ISM) said its domestic factory activity index rose to 61.1 last month from 59.9 in August. Read more

In other currencies, the euro was flat at $ 1.1587, down about 1.1% for the week, the pace of its largest percentage decline since June.

The yen rebounded against the dollar after a 19-month low overnight, with the greenback losing 0.3% to 110.98 yen.

Commodity currencies rallied against the dollar on Friday.

The Australian dollar gained 0.5% to US $ 0.7266 and fell 3.6% in the third quarter – the worst performance of any G10 currencies against the dollar – as prices for Australia’s main export , iron ore, fell sharply.

The pound sterling was also underperforming in the last quarter, down 2.5%, and is expected to post its worst week in more than a month, amid growing supply chain problems.

The British pound climbed 0.6% to $ 1.3560, just above a 9-month low at $ 1.3516.

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Price of currency offers at 11:14 (1514 GMT)

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Price of currency offers at 11:14 (1514 GMT)

Reporting by Gertrude Chavez-Dreyfuss in New York and Ritvik Carvalho in London; Additional reporting by Tom Westbrook in Singapore and Anushka Trivedi in Bangalore; Editing by Nick Macfie, Chizu Nomiyama and David Evans

Our Standards: Thomson Reuters Trust Principles.