NEW YORK, May 27 (Reuters) - The dollar edged lower on
Friday on its way to a second-straight weekly decline as traders
pared expectations for U.S. Federal Reserve interest rate hikes
and as improving inflation and consumer spending data eased
The dollar index, which measures the safe-haven
currency against a basket of six other major currencies, fell as
low as 101.43, its weakest since April 25. On a weekly basis, it
was down 1.24%, following a 1.45% decline the previous week. At
3:10 p.m. Eastern time (1910 GMT), the dollar was down 0.059% at
"We continue to think that the best of the broader USD rally
is behind us now and while the USD may not fall significantly
yet, further gains seem unlikely," strategists from Scotiabank
said in a client note.
The "Fed is fully priced and expectations for rate hikes
later in the year may be subject to revision if the economy
slows more quickly than expected," they said.
The greenback hit a nearly two-decade peak above 105 earlier
this month but has declined along with outlooks for the
magnitude of likely Fed rate hikes this year, which have been
fueled in part by fears over runaway inflation.
"The dollar is losing altitude as the view of the Fed
pausing rate hikes in the fall gains traction," said Joe
Manimbo, senior market analyst at Western Union Business
Minutes from the Fed's May meeting this week showed most
participants believed 50 basis-point hikes would be appropriate
at the June and July policy meetings, but many thought big,
early hikes would allow room to pause later in the year to
assess whether tighter policy is helping to tame inflation.
Although inflation continued to increase in April, it rose
less than in recent months, data showed on Friday. The personal
consumption expenditures (PCE) price index rose 0.2%, the
smallest gain since November 2020, after shooting up 0.9% in
March. For the 12 months through April, the PCE price index
advanced 6.3% after jumping 6.6% in March.
Benchmark U.S. Treasury yields were lower on Friday, but
briefly bounced off session lows after the April inflation
figures, which boosted hopes that the worst of soaring price
pressures has passed.
A separate report showed U.S. consumer spending rose more
than expected last month as households boosted purchases of
goods and services.
Next week's key U.S. report will be the nonfarm payrolls
numbers for May at the end of the week.
"The jobs data will shed some light on the scope for
tightening from the third-quarter forward," said Manimbo.
The euro has been the chief beneficiary of the dollar's
decline, but that momentum has also stalled as investors believe
much of the expected rate hikes from the European Central Bank
have been priced into current levels.
The single currency was flat for the day at
$1.0731, having earlier risen to its highest levels in a month.
Sterling was 0.16% higher at $1.2628.
The risk-sensitive Australian dollar rallied 0.8%
to $0.7156, while the New Zealand dollar jumped 0.88%
Better risk sentiment did not help bitcoin,
however, which was 2.59% lower at $28,426, continuing this
week's gradual decline from the psychologically important
(Reporting by John McCrank; additional reporting by Saikat
Chatterjee in London; editing by Susan Fenton, Kirsten Donovan
and Jonathan Oatis)