Dollar Slumps, Inflation Diminish, Fed Expectations

On Friday, the US dollar fell to a year-low against a cradle of currencies. The euro hit a year-to-date high as traders reinforced expectations that the Federal Reserve’s rate-hiking cycle and signs of a slowdown in inflation are imminent.

Information from the US Labor Department on Thursday appeared that the producer price index (PPI) declined the most in almost three years last month, a day after inflation data showed dovish consumer prices.

The dollar fell again on Friday, with the US dollar index, which evaluates the currency against its six major counterparts, falling to a yearly low of about 100.78.

Recently down by 0.15% to 100.82 and was heading for a weekly decline of more than 1%, its biggest drop since January.

Other Currencies Analysis

Meanwhile, the euro hit a new yearly high of $1.1075 and broke its previous high on Thursday.

The single currency recently rose by 0.2% to $1.1070 and is on course for a weekly gain of over 1.5%.

Similarly, the British pound reached a 10-month high at $1.2545 and recently rose 0.14% to $1.25405.

Money markets are looking at a 69% chance the Fed will increase interest rates by 25 basis points next month, although a series of cuts are being priced from July through the year’s end, with the rate above 4.3% in December.

The New Zealand dollar was also up by 0.19% to $0.6309 after rising by 1.3% on Thursday. Australian and New Zealand dollars are often used as currency equivalents of the Chinese yuan.

Elsewhere in Asia, the Japanese yen rose to 132.47 against the dollar, while the offshore yuan appreciated more than 0.5% to 6.8327 against the dollar.