The dollar dropped for a second week as data on the world’s largest economy persistently trailed forecasts, raising questions about whether the Federal Reserve will have scope to raise interest rates this year.
The greenback fell against most of its major peers as orders of durable goods, manufacturing, and new home sales all came in weaker-than-projected. Fed officials will decide on monetary policy on April 29, the same day a report is projected to first quarter economic growth slowed.
“The dollar will go through a period of consolidation,” said Sireen Harajli, a strategist at Mizuho Bank Ltd. in New York. “The fact that U.S. data has been coming in on the softer side confirms the expectation that first-quarter growth is supposed to be very weak.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, slipped 0.4 percent this week to 1,180.61 in New York. The index has gained 4.4 percent this year, after increasing 11 percent in 2014.
The dollar declined 0.6 percent this week to $1.0873 per euro and fell 0.5 percent to 118.99 yen.
Net bullish bets for the dollar to strengthen against eight major counterparts by hedge funds and money managers fell to the least since October, according to Commodity Futures Trading Commission data. Futures positions betting on a stronger greenback were at 324,940 contracts as of April 21.
An index of U.S. economic surprises, which measures data relative to economists’ projections, reached the lowest level since the recession six years ago. Gross national product expanded at a 1 percent annual rate in the first quarter, down from the prior 2.2 percent in the fourth quarter, according to a Bloomberg survey of economists.
The Federal Open Market Committee was split at its meeting in March on when to begin raising rates, which have been held in a range of zero to 0.25 percent since 2008 to support the economy.
“The dollar rally is on pause as the market awaits more insight from the Fed,” Lennon Sweeting, a Toronto-based dealer at the broker and payment provider USForex Inc., said by phone. “There are definitely areas that require quite a bit of improvements in order for the market to get back to a place where they expect a rate hike from the Fed.”
Optimism on political and economic stability overseas also contributed to weakness in the dollar this week. The greenback fell against the euro for a second week amid pledges from officials that Greece isn’t leaving the euro zone, and that no contingency plan is being prepared for the failure of negotiations with the nation’s anti-austerity government.
Greece has to pay interest of about 201 million euros ($217 million) on its International Monetary Fund loans due early next month.
Both sides will probably reach a deal “because the cost of a Greek resolution is relatively modest and the price of no Greek resolution is so catastrophically high,” Krishna Memani, the New York-based chief investment officer at Oppenheimer Funds Inc., said by phone.
The dollar also slipped to a seven-week low against the pound as the latest poll shows neither the Conservative nor Labour parties will win majority in Parliament next month. That’s an outcome consistent with market expectations and previous polls.