The dollar changed slightly from its main rivals on Friday, but was on track for its best week of four as investors assessed the impetus for tighter Federal Reserve policies and the risks of a US recession.
The dollar index, which measures the currency against six counterparts, rose 0.07% in Asian trade, after falling 0.32% overnight, when it was undermined by weaker-than-expected consumer spending data.
For the week, it rose 0.66% in a complex push and pull, as fears of a global slowdown boosted the attractiveness of greenbacks due to its asylum status.
The market will watch for a weakness in ISM production data in the US, which should be expected later in the day.
“US sentiment is deteriorating amid growing fears of a recession, but focusing on growth in the United States in isolation has never been a good way to trade US dollars,” RBC Capital Markets strategists wrote in a note to clients.
The chances are extremely low that the United States will fall into recession, while the rest of the world will not, strategists said.
The dollar and other escape currencies such as the yen and the Swiss franc will benefit at the expense of commodity currencies and sterling during a global downturn, they added.
The Fed has raised the political interest rate by 150 basis points since March, half of which came last month in the central bank’s biggest increase since 1994.
The market is betting on another of the same scale at the end of this month.
The European Central Bank is expected to raise interest rates this month for the first time in a decade, although economists are divided on the size of each increase.
Markets will look at data on inflation in the eurozone, which should be expected later in the day to see how aggressive the ECB can be.
The euro fell 0.16% to $ 1.0469 on Friday, falling after the dollar’s weakness rose 0.39% on Thursday to break the two-week low of $ 1.0381.
For the week, it fell by 0.86%, with investors estimating that Europe’s economic situation is more precarious than in the United States, complicated by the energy crisis caused by the war in Ukraine.
The yen was almost flat, buying $ 135.77 per dollar from the Japanese currency.
In the middle of the week, the yen fell to the lowest level in several decades of 137.00 per dollar, as the Fed’s aggressive stance contrasted sharply with the steadfast pigeon of the Bank of Japan.
Since last Friday, the dollar has risen 0.41% against the yen, which would be the fifth weekly gain.
Sterling fell 0.26% to $ .1.11475, reversing the rise of 0.45% on Thursday. For the week it has fallen by 1.02%.
The risk-sensitive Australian dollar was also 0.26% lower, changing hands to $ 0.6885.
It has fallen 0.81% this week.
The Reserve Bank of Australia decides the policy on Thursday and markets expect an increase of half a point to the key interest rate. But that didn’t help much for Australia, which instead tracked lower commodity prices as global economic prospects deteriorated.
“We have been arguing for some time about a weakness below $ 0.70 and that we will allow this decline to develop, especially given the widespread stagflationary / recessionary pressures,” Westpac strategists wrote in a note, choosing $ 0.6750 as “the next obvious goal.” for the currency.