Dollar Runs Out of Puff as Traders Grow Least Bullish This Year

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A gauge of the dollar headed for its smallest weekly gain in more than a month as traders cut bets to the lowest this year that the currency will appreciate against seven of its major peers.

U.S. reports next week on economic growth and durable-goods orders will provide further clues about how long the Federal Reserve will wait before raising interest rates. Policy makers have said they expect to boost borrowing costs this year while stressing the decision is data-dependent. The dollar has gained almost 7 percent this year, making U.S. exports less competitive.

“Dollar buying has been advancing on expectations of a Fed rate hike, while the risk of a stronger dollar conversely delaying rate hikes has also weighed on it,” said Shinji Kureda, head of foreign-exchange trading at Sumitomo Mitsui Banking Corp. in Tokyo. “Falling commodity currencies on the back of the dollar strength and falling U.S. yields also weigh on the dollar against the yen.”

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major peers, has risen less than 0.1 percent this week to 1,209.34 as of 7:09 a.m. in London. It climbed to 1,212.02 on July 21, the highest since April 13. The weekly gain is the least since a decline in the period ended June 19.

Traders were this week the least bullish on the greenback versus the Canadian dollar since October 2010, against the pound since August 2014, and the euro since October 2014, according to data compiled by Bloomberg based on risk reversals.

Fed ‘Uncertainty’

“There’s a lot of uncertainty over whether the U.S. economy can sustain a period of interest-rate tightening,” said Derek Mumford, director at Rochford Capital, a currency risk-management company in Sydney.

Futures show a 40 percent chance the Fed will boost its benchmark rate by September, and 73 percent odds it will do by year-end, according to data compiled by Bloomberg.

The dollar was little changed at $1.0975 per euro on Friday having declined 1.3 percent this week. It depreciated to $1.1018 on Thursday, the weakest level since July 15.

The greenback has still gained 7.9 percent this year, the best performer after the Swiss franc of 10-developed nation currencies tracked by Bloomberg Correlation-Weighted Indexes.

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