Dollar rises on U.S. interest rate speculation as euro, yen fluctuate

(MENAFN) The U.S. dollar remained close to a one-week high against major global currencies on Friday, indicating the end of its five-week losing streak. This strength comes as recent economic data reduced expectations for a significant interest rate cut by the Federal Reserve. The dollar's resilience was reflected in its performance against the euro, which hovered near a two-week low. Slowing inflation rates in key European economies, including Germany and Spain, have increased the likelihood of the European Central Bank adopting a more relaxed monetary policy stance. Meanwhile, the Japanese yen held steady around the 145 mark against the dollar, having weakened on Thursday following a rise in U.S. Treasury yields. Despite data showing that core consumer prices in Tokyo rose at a higher-than-expected rate of 2.4 percent in August—surpassing the Bank of Japan's 2 percent target—the yen showed little reaction. Another measure of inflation that excludes energy costs showed a smaller increase of 1.6 percent.

U.S. economic indicators continue to influence market sentiment, particularly data revealing that the country's gross domestic product (GDP) expanded at an annualized rate of 3 percent in the second quarter. This figure was revised upwards from the initial estimate of 2.8 percent reported last month, contradicting expectations by economists surveyed, who had anticipated no change in the growth rate. The revised GDP data have led market participants to reassess their expectations regarding the Federal Reserve's next moves. According to the CME FedWatch tool, traders are now forecasting a quarter-point rate cut at the Federal Reserve's upcoming meeting on September 18. The probability of a more substantial 50 basis point cut, however, has decreased to 34 percent, down from 38 percent just a day earlier.

Reflecting these market dynamics, the dollar index, which tracks the performance of the greenback against a basket of six major currencies, remained relatively stable at 101.34 in early trading on Friday, following a 0.36 percent increase earlier in the week. On Tuesday, the index had reached its highest level since August 22, hitting 101.58. The dollar's performance against its major counterparts signals that investors are still weighing the potential impact of economic data and central bank decisions on future currency movements.

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