Investing.com– The dollar fell slightly on Friday but was on course for a fourth week of gains amid growing bets that the Federal Reserve will hike interest rates again by end-2026.
Anticipation of U.S. consumer sentiment and inflation expectations data also spurred some caution, while a drop in oil prices offered limited relief.
The Japanese yen weakened slightly on middling household spending data, while the South Korean won was flat in holiday-thinned trade.
The euro added 0.1% in morning trade, while the pound was flat. The Australian dollar rose 0.2%.
Cooling Treasury yields helped take some pressure off currency markets this week as a rout in the bond market paused. But yields remained close to multi-decade peaks.
Dollar muted but set for fourth straight week of gains
The dollar index and dollar index futures both fell 0.07% on Friday, tracking overnight declines in yields.
But the greenback was still set to add about 0.13% this week, its fourth straight week of gains.
The dollar remained close to a 1-½ year high hit earlier this week, with the minutes of the Federal Reserve’s September meeting indicating that the central bank remained hawkish. The Fed had raised rates by 25 basis points during the meeting, citing risks from inflation.
While markets priced down expectations for a hike in October, they remained confident that the Fed will raise rates by 25 bps again in December, CME Fedwatch showed.
Waning bets on an October hike saw Treasury yields fall slightly this week, although the 10-year yield remained close to its highest level since 2002.
Focus on Friday was on Michigan consumer sentiment and inflation expectations data for more cues on the world’s biggest economy.
Japanese yen edges lower as household spending falls
The Japanese yen’s USD/JPY pair rose 0.2% after government data showed household spending fell for a ninth straight month in August.
Spending fell 3.1% annually, less than expectations for a 3.5% drop, and grew 0.1% month-on-month, less than estimates of 0.5%.
The print came just days after middling wage growth data for August, and raised more questions about strength in Japanese private spending and the economy.
Private spending has persistently slowed this year despite continued government efforts to stimulate growth, which included tax cuts and subsidies on fuel and utilities.
Soft spending may see the Bank of Japan question the need for more interest rate hikes this year, after the central bank raised rates by a cumulative 50 basis points amid growing concerns over sticky inflation.
