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The dollar steadied on Friday following a string of declines but remained on course for its worst week since November as traders reined in their bets on further interest rate rises from the Federal Reserve.
An index tracking the currency against a basket of six peers has slumped 2.5 per cent over the past five sessions, its worst run since it fell 4.1 per cent in a week in November.
The index added 0.1 per cent on Friday, at the end of a week in which economic data showed further signs of cooling inflation, with producer and consumer prices having fallen more than expected in June.
“Dollar long positions are evaporating rapidly, with [producer price] numbers all but confirming the disinflationary narrative in the US,” said Francesco Pesole, currency analyst at ING.
June’s inflation figures “reinforced our view that recent dollar weakness will persist”, said Mark Haefele, chief investment officer at UBS Global Wealth Management. Sterling, the yen and the Swiss franc all stood to benefit, as did gold, which tends to rise in price as the dollar declines, Haefele added.
Wall Street stocks inched higher on Friday, leaving major indices on track for their fifth straight session of gains, while higher interest rates boosted profits at some of the country’s biggest banks.
Shares in Wells Fargo and JPMorgan rose 0.7 per cent and 0.3 per cent, respectively, after the latter reported a 67 per cent jump in year-on-year net income to $14.47bn, far ahead of analysts’ estimates of $11.9bn.
Wells Fargo’s net income surged 57 per cent from a year ago to nearly $5bn. Citigroup’s profits fell more than a third in the second quarter, sending its shares down 3.1 per cent, while State Street fell by a tenth on rising costs. Asset manager BlackRock’s net income rose 27 per cent.
The banks’ second-quarter results come at a time of heightened scrutiny of lenders’ balance sheets following the collapse of several regional banks in the spring. Banks are also under pressure to raise rates on consumer deposits given that they have begun to charge more for loans as the Federal Reserve has raised borrowing costs.
Wall Street’s benchmark S&P 500 added 0.2 per cent shortly after the New York open, while the tech-heavy Nasdaq Composite gained 0.4 per cent.
Still, a rally in US stocks in the face of rising rates has stoked concerns of a potential sell-off if and when the economy sinks into recession.
“We’re due for a pullback but there’s an upside fever out there so we may not see it for a while,” said Mike Zigmont, head of trading and research at Harvest Volatility Management. “It’s going to take some really spectacular news or data to keep this upside momentum going. I personally don’t think earnings season can do it.”
European stocks wavered, with the region-wide Stoxx 600 down 0.1 per cent, ending a run of five consecutive positive sessions, its best streak since mid-April. France’s Cac 40 added 0.1 per cent, Germany’s Dax fell 0.2 per cent and London’s FTSE 100 lost 0.1 per cent.
Asian markets were mixed. South Korea’s Kospi advanced 1.7 per cent, Hong Kong’s Hang Seng index rose 0.3 per cent and China’s CSI 300 was flat. Japan’s Topix fell 0.2 per cent.
