Dollar is on Track for its Worst Week Since May

The world’s reserve currency traded near a one-month low on Friday. The U.S. dollar is on course for its worst weekly performance since May as dovish remarks by the Federal Reserve together with underwhelming economic data took the steam out of a month-long rally.

The dollar index, which measures the greenback’s performance against a basket of six other currencies, stood at 91.845. At some point, the index reached 91.776, its best result since June 29. For the month, it is down 0.5% so far, following a 2.8% rally in June.

The greenback’s downtrend began after Fed Chairman Jerome Powell’s wrong-footed bulls following a meeting. Last week, Jerome Powell stated that rate increases were “a ways away” and the job market still had “some ground to cover”. The Federal Reserve is monitoring the labor market and it is not concerned about inflation.

The greenback found little support overnight from U.S. gross domestic product (GDP) numbers. The country’s economy grew in the second quarter, but growth fell short of economists’ expectations. The economy expanded at a 6.5% annualized rate in the second quarter, but 6.5%  was not enough to meet the expectations.

Dollar, yen, and the euro

The U.S. currency held near a two-week low against the Japanese yen at 109.52. The euro climbed to a one-month high against the dollar and last traded at $1.19.

The economy of the euro zone grew faster than expected in the second quarter of the year. It recovered from a recession caused by the coronavirus pandemic, while the inflation surpassed European Central Bank’s 2% target in July.

Strategists from ING noted several important details about the euro. The euro zone’s recovery from its technical recession should be a game changer for the ECB according to strategists. They also mentioned that the short-term fate of the euro/dollar still looks mostly tied to the dollar and global dynamics. ING Strategists also added that fresh signs of turbulence from Asia implied it might be too early for the euro to return above $1.19.

On Friday, the Chinese yuan traded at 6.4566 per dollar.

Both Australian and New Zealand dollars hovered near two-week highs.

The British pound was close to its best result in over a month thanks to the U.S. dollar’s weaker tone. A decline in coronavirus cases in the U.K. also helped to boost the pound.