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Dollar rises after U.S. data, but posts largest monthly fall since December

04/30/2021 | 03:21pm EDT
A U.S. Dollar banknote

NEW YORK (Reuters) - The dollar rose on Friday, extending gains after upbeat data on personal income, spending, and manufacturing in the U.S. Midwest, with market participants also taking profits on the currency's short dollar positions this month.

The dollar index was down 2.1% for the month of April, its largest monthly loss since December.

Next week's U.S. data, which includes non-farm payrolls for April and key U.S. manufacturing and services indexes, should reinforce expectations of a strong recovery from the pandemic by the world's largest economy.

"Another round of potentially strong data in the U.S. may add pressure to start discussing tapering," said ING in its latest research note.

"With some possible fresh weakness in Treasuries on the way, the U.S. dollar might find some respite against the low-yielders," the bank added.

After the Fed's policy meeting on Wednesday, Fed Chair Jerome Powell acknowledged the U.S. economy's growth, but said there was not enough evidence of "substantial further progress" toward recovery to warrant a change to its ultra-loose monetary settings.

Friday's data showing a 4.2% rebound in U.S. consumer spending in March, amid a 21.1% surge in income as households received additional COVID-19 relief money from the government, supported the dollar. That led to a 0.4% rise in the core personal consumption expenditures (PCE) index, compared with a gain of 0.3% the previous month.

"Powell remained firm on the Fed's interest rate path and QE (quantitative easing) program on Wednesday, leaving traders with the uncomfortable feeling inflation could run away - and run away quickly," Adam Corbett, currency analyst, at Cambridge Global Payments, said in a research note after the data.

Similarly, the dollar also gained after the Chicago Purchasing Management Index (PMI) showed a reading for April of 72.1, the highest in almost four decades.

In afternoon trading, the dollar index ended the week up 0.5%. It was last up 0.7% at 91.263, the largest daily gain since late February.

"The current strength in the dollar is likely a pivot to the seasonal trend that we tend to see in May and June," said Mazen Issa, senior currency strategist at TD Securities in New York, after the greenback's underperformance this month. He added that April is typically one of the weaker months for the dollar.

Graphic: Dollar heads for fourth weekly loss -

The Canadian dollar climbed to a more-than three-year high of C$1.2266 per greenback on Friday, on track for a 1.6% weekly gain that would be its biggest since early November. The U.S. dollar was last flat at C$1.2276.

In contrast to the Fed's dovishness, the Bank of Canada has already begun to taper its asset purchases. Canada's commodity-linked loonie got additional support from a surge in oil to a six-week peak, along with higher lumber prices.

The euro traded 0.8% lower at $1.2025, posting its largest daily percentage fall since late February. But it was up 2.5% for the month versus the dollar, its best monthly showing since July 2020.

The dollar also rose against the yen, up 0.3% at 109.29 <JPY=EBS>, rising 1% for the week. But it was down 1.3% for the month, its worst monthly showing since July 2020 as well.

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Ritvik Carvalho, Editing by Hugh Lawson, Mark Heinrich and Chizu Nomiyama)

By Gertrude Chavez-Dreyfuss


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / EURO (AUD/EUR) 0.17% 0.6405 Delayed Quote.1.53%
AUSTRALIAN DOLLAR / JAPANESE YEN (AUD/JPY) 0.62% 85.093 Delayed Quote.6.50%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) 0.73% 0.77796 Delayed Quote.0.37%
BRITISH POUND / CANADIAN DOLLAR (GBP/CAD) -0.21% 1.7057 Delayed Quote.-1.64%
BRITISH POUND / EURO (GBP/EUR) -0.24% 1.1602 Delayed Quote.3.94%
BRITISH POUND / JAPANESE YEN (GBP/JPY) 0.16% 154.078 Delayed Quote.9.01%
BRITISH POUND / US DOLLAR (GBP/USD) 0.34% 1.40928 Delayed Quote.2.72%
CANADIAN DOLLAR / EURO (CAD/EUR) 0.00% 0.680429 Delayed Quote.5.72%
CANADIAN DOLLAR / JAPANESE YEN (CAD/JPY) 0.39% 90.321 Delayed Quote.10.92%
CANADIAN DOLLAR / SWISS FRANC (CAD/CHF) -0.05% 0.74393 Delayed Quote.7.16%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.01% 0.8256 Delayed Quote.4.64%
DOW JONES FXCM DOLLAR INDEX -0.28% 11710.3 Delayed Quote.0.30%
EURO / US DOLLAR (EUR/USD) 0.57% 1.21451 Delayed Quote.-1.12%
INDIAN RUPEE / EURO (INR/EUR) 0.00% 0.011239 Delayed Quote.0.58%
INDIAN RUPEE / JAPANESE YEN (INR/JPY) 0.00% 1.49334 Delayed Quote.5.50%
INDIAN RUPEE / US DOLLAR (INR/USD) 0.00% 0.013655 Delayed Quote.-0.55%
JAPANESE YEN / SWISS FRANC (JPY/CHF) -0.41% 0.8238 Delayed Quote.-3.51%
NEW ZEALAND DOLLAR / CANADIAN DOLLAR (NZD/CAD) 0.44% 0.87769 Delayed Quote.-4.32%
NEW ZEALAND DOLLAR / JAPANESE YEN (NZD/JPY) 0.85% 79.313 Delayed Quote.6.10%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.95% 0.72495 Delayed Quote.0.03%
US DOLLAR / CANADIAN DOLLAR (USD/CAD) 0.02% 1.2102 Delayed Quote.-4.38%
US DOLLAR / JAPANESE YEN (USD/JPY) -0.15% 109.347 Delayed Quote.6.12%
WTI 2.59% 65.462 Delayed Quote.32.44%
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