New York, June 24 (BNA): The dollar rose against the euro on Friday after dismal business data from around the world soured risk sentiment and hawkish comments from central banks added pressure on riskier currencies.
US business activity fell to a three-month low in June as services growth eased for the first time this year and a deepening contraction in the manufacturing sector, closely watched survey data showed on Friday.
However, the overall picture is that US economic growth picked up somewhat in the second quarter even as concerns persist that the Federal Reserve’s aggressive rate hikes over the past year will lead to a recession.
Data earlier in the session showed that business growth in the euro zone virtually stalled in June. The slowdown in manufacturing deepened, while activity in the bloc’s dominant services sector barely expanded, as overall demand fell for the first time since January.
“We’re starting to see signals from companies that demand is starting to soften on the margins and that’s leading to a recalibration of expectations for what future production will be,” said Bipan Rai, head of FX strategy at CIBC Capital Markets North America. .
“I think the concern about the future outlook is weighing on risk appetite right now, and the dollar is kind of resorting to trying to get out of that,” Ray said.
The euro fell 0.57% to $1.08925, its lowest level in three days against the US dollar. The dollar index, which measures the currency against six rivals, rose 0.49% to 102.89.
Ray said traders who put the books in order towards the end of the month as the quarter approaches were also likely to support the greenback.
Friday’s data arrived after surprise rate hikes and hawkish comments from central banks globally renewed market fears that policymakers must go further in tightening policy to tame inflation, even at the risk of tipping their economies into recession.
“After larger-than-expected rate hikes in the UK and Norway yesterday, markets are wary of rate hike surprises, and that was helping the dollar overnight, even before we saw European PMI data,” Kate Jokes, senior foreign exchange analyst at Societe Generale said in a note.
Federal Reserve Chairman Jerome Powell said Thursday that the central bank will move interest rates “at a precise pace” from here, but ruled out rate cuts “any time soon.”
Against the yen, the dollar rose 0.44% to 143.76 yen, its strongest level in more than seven months. The Japanese currency has come under renewed pressure as the Bank of Japan (BOJ) maintains a very dovish stance.
Data released on Friday showed that Japanese consumer core inflation beat expectations in May and the index excluding fuel costs rose at the fastest annual pace in 42 years, putting pressure on the Bank of Japan to phase out massive stimulus.
The pound fell 0.30% on Friday at $1.271, on track to end the week down about 1%, its biggest weekly loss in six weeks.
The British currency has come under pressure from growing expectations that the British economy could slip into recession after the Bank of England on Thursday dramatically raised interest rates in response to persistent inflation.
The Australian and New Zealand dollars struggled on Friday as traders avoided riskier currencies.
The Australian dollar fell 1.16% to $0.6678 and is heading for a weekly loss of around 3%, its worst week since late August. The kiwi fell 0.62% to $0.6139, down about 1.6% for the week.
In cryptocurrencies, bitcoin rose 3.46% to a one-year high of $30,924, a pace for gains close to 17% for the week, the best weekly gain since mid-March, buoyed by BlackRock (BLK.N)’s plan to create a cryptocurrency. Bitcoin exchange traded fund.
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