The dollar was weaker against the yen at 148.73, but stayed near Thursday’s high of 149.40, a level last seen on August 2
The yen rose against the dollar on Friday but looked on course for its biggest weekly drop since June after a raft of U.S. economic data eased fears of a recession and supported bets of gradual easing of monetary policy by the Fed.
The dollar was weaker against the yen at 148.73, but stayed near Thursday’s high of 149.40, a level last seen on August 2.
Risk-sensitive currencies such as sterling were strong as the improved economic outlook spurred a rally in equities.
Data on Thursday showed the number of Americans filing new applications for unemployment benefits dropped to a one month-low last week and U.S. retail sales rose by the most in 1-1/2 years in July, dashing expectations that the Federal Reserve could cut interest rates by a super-sized 50 bps next month.
We are in the camp that thinks growth slowdown is there, inflation is slowing and the Fed will start reducing rates but it is not going to be a panic situation, which was turning into a narrative a week or two ago, according to Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International.
We remain of the view that we’ll see 2-3 cuts, very likely two rather than three unless the increase unemployment rate that we saw in the last payrolls report sustains, he added.
Traders are convinced the Federal Reserve will reduce rates on September 18, but had debated the size of the cut after surprisingly soft U.S. payrolls data had pushed the odds of the larger 50 basis point cut to 71% in early August.
Odds for such a move currently sit at 28%, down from 36% a day earlier, as per the CME Group’s FedWatch Tool.
The dollar index declined 0.2% to 102.84 as of 0830 GMT.
