Dollar on track for best week in month By Reuters

Written by Karen Brettell

NEW YORK (Reuters) – The dollar fell on Friday but was on track for its strongest weekly performance since early November on expectations that the U.S. economy will continue to grow. than its global peers this year and that US rates will remain high.

A firm labor market and stubbornly high inflation have pushed up Treasury yields in recent weeks and increased demand for the US dollar.

New policies under the incoming administration of Donald Trump, including the removal of trade regulations, tax cuts, curbs on illegal immigration and tariffs, are also expected to boost growth and increase price pressures.

It ended the day down 0.16% at 109.04, after hitting a two-year high of 109.54 on Thursday. It is on track for a weekly gain of 0.94%.

Despite the recent gains in the dollar there are still many doubts about when the policies will be introduced by the new American government, and what their impact will be. That could halt the dollar’s rally in the near term.

“We may see a weakening of the dollar when the administration comes in because all these proposed tariffs – it will take time to implement them and we do not know for sure whether all these proposals will be implemented or not, ” said Helen Given, FX trader at Monex USA in Washington.

“As we go through the second half of this calendar year I think we’re going to see some more dollar strength,” Given said.

The euro faces a weak growth outlook and could be hurt by US interest rates, while the European Central Bank is expected to cut rates more than the Federal Reserve this year.

Traders are betting on a 100 basis point rate cut by the ECB towards the end of the year, and a less than certain chance of a 50 basis point rate cut by the Fed.

Uncertainties including the French currency war and the German election also weigh on the single currency.

The euro ended up 0.23% at $1.0289 but was headed for a weekly decline of 1.35%, the worst since early November.

Sterling gained 0.15% to $1.2399. It was on track to lose about 1.39% for the week, the most since the beginning of November.

The dollar fell 0.15% to 157.29 Japanese yen, holding below a five-month high of 158.09 reached in December.

The Japanese currency has been hurt by a widening interest rate differential between the US and Japan, with the Bank of Japan’s warning about the rate adding to the spell of pain for the yen.

China hit its weakest level in more than a year at 7.3199 per dollar, as falling yields and expectations of a domestic rate cut continue to weigh on the currency.

In cryptocurrencies bitcoin fell 0.15% to $96,969.