Dollar pares losses as equity sell-off eases

Friday,   12-Oct-2018   02:19 PM (IST)

The dollar crept up on Friday, reflecting investor confidence in the U.S. economy, despite criticism by President Donald Trump of the Federal Reserve and a sell-off in U.S. equities.The decline in stocks has yet to spread into foreign exchange markets, with emerging market currencies still appreciating and the safe-haven Japanese yen and Swiss franc not budging significantly.Concern about a trade war between the United States and China and expectations interest rates will rise further in coming months have underpinned the dollar's 2.5 percent rise since July.But a drop in U.S. Treasury bond yields and weaker-than-forecast rise in U.S. consumer prices saw the dollar shed half a percent on Thursday as traders cut their bets on Federal Reserve rate hikes.Hedge fund have staked out their longest dollar positions since the end of 2016 and markets are focused on any tweak in data that could alter the Fed's thinking.The dollar index, a gauge of its value against six major currencies, traded flat at 95 on Friday, down from its monthly high of 96.15 on Tuesday.The euro was the main beneficiary of dollar weakness on Friday, reaching a weekly high at 1.1611 after minutes of the last European Central Bank meeting set a positive tone.The minutes suggested the ECB was on track to normalize its ultra-loose monetary policy this year despite concern about slowing growth in Europe.The Japanese yen , a preferred currency in times of market turbulence, traded at 112.34 on Friday. It had strengthened to 111.83 versus the dollar on Thursday, its highest since Sept. 18.The Australian dollar was at $0.7122, recovering from Monday's two-year low of $0.7039. The rally was aided by promising news out of China, its biggest trade partner.