Dollar trades lower with Fed cut in view, on course for monthly drop
The dollar weakened against the euro and Swiss franc on Friday, on course for a 2% decline in August against a basket of currencies, as traders prepared for a U.S. interest rate cut by the Federal Reserve next month.
The dollar, which initially firmed after U.S. inflation data came in as expected, later gave up gains, failing to break a three-day losing streak.
The U.S. Commerce Department reported on Friday that its Personal Consumption Expenditures (PCE) Price Index rose 0.2% last month after an unrevised 0.3% rise in June.
The data keeps the Fed on track for a widely expected rate cut at its upcoming meeting on September 16-17. Money markets are pricing in an 87% chance of an easing, up from 63% a month earlier, CME's FedWatch tool showed.
The dollar index , which measures the greenback against a basket of currencies, was down 0.09% at 97.803 in afternoon trading.
"FX markets remain range bound as investors await the next U.S. labor market report on September 5th," said Dan Tobon, head of G10 FX strategy at Citi.
Weak consumer sentiment continues to hang over an anxious market, which is rebalancing and hedging portfolios at month's end after U.S. equities rallied throughout August, said Uto Shinohara, senior investment strategist at Mesirow Currency Management.
Euro zone consumers kept their inflation expectations mostly stable at or above the European Central Bank's 2% target in July, according to an ECB poll released on Friday.
Data released on Friday also showed French consumer prices rose slightly less than anticipated in August while Spain's European Union-harmonized 12-month inflation rate was steady at 2.7%.
The euro was up 0.11% at $1.1696 and sterling was flat at $1.3502. Both were more than 2% higher for the month. Against the yen , the dollar edged up 0.02% to 146.985 yen, while for the month it was 2.5% lower.
Against the Swiss franc <CHF=EBS>, the dollar weakened 0.26% to 0.7997 and was 1.3% lower on the month.
Among other currencies, the New Zealand dollar was slightly stronger after Reserve Bank of New Zealand Chairman Neil Quigley tendered his resignation, citing the fallout over the handling of the sudden resignation of the central bank's governor earlier this year.
Source: Reuters
