Investing.com – The U.S. dollar fell on Friday but remained on a strong weekly path, boosted by expectations of better U.S. economic performance and fewer rate cuts by the Federal Reserve this year.
which tracks the greenback against a basket of six other currencies, was last down 0.3% at 108,900, pulling back after hitting its highest level in more than two years on Thursday.
The dollar remains strong
The index is on track for a weekly gain of around 1%, which would be its best weekly performance in more than a month, as traders continue to factor in an increasingly hawkish Fed and a resilient US economy.
US manufacturing activity data for December, found , was stronger than expected on Thursday, setting the stage for a more popular version of the Institute for Supply Management to be released later in the session.
This index is seen to have cooled slightly to 48.2 last month, down from a five-month high of 48.4 in November. It was the eighth consecutive month that the measure was below the 50-point threshold, although the figure remained above the 42.5 level that the ISM says indicates broader economic expansion.
Markets will also await the important monthly jobs report late next week, with the Fed’s next meeting also this month.
“Markets fully expect a hold in January,” ING analysts said in a note. “If the dot chart does indeed function as a benchmark for the expected rate for the next three months, the bar for a data surprise that would seriously undermine the dollar’s large advantage in the exchange rate has been set higher.”
Euro rebounds but faces big weekly decline
In Europe, it rose 0.4% to 0.0042, recovering somewhat after falling nearly 1% in the previous session to its lowest level in more than two years.
The single currency was helped by the number of people out of work, which rose less than expected in December, according to data released on Friday.
However, the euro was still headed for a weekly decline of around 1.5%, its worst since November, after data released earlier on Thursday showed it fell at a faster rate in the eurozone at the end of 2024.
Traders were expecting more interest rate cuts from 2025, with the market pricing in at least 100 basis points of easing.
traded 0.3% higher at 1.2422, after slipping over 1% on Thursday and is on track to lose roughly 1.4% for the week.
Interest rates were left unchanged last month after consumer prices rose above target, with traders expecting roughly a 60 basis point cut from the Bank of England in 2025.
Yuan falls after PBOC rate cut report
In Asia, it rose 0.8% to 7.3587, with the pair climbing to its highest level since September 2023.
The Financial Times reported that the PBOC will cut interest rates further in 2025, as the central bank turns to a more conventional monetary policy structure under a single benchmark interest rate.
The monetary policy reform comes after a series of liquidity measures have largely failed to boost China’s economy over the past two years.
traded 0.1% lower at 157.31, after hitting a more than five-month high in late December thanks largely to the Bank of Japan’s 2025 outlook.
