Dollar Finds Foothold as Divergence Curbs Worst Streak Since May

  • Consumer confidence, industrial reports support greenback
  • U.S. rates cycle `on different plane' to peers, Barclays says

The dollar rose for a second day, recapturing territory amid its longest losing streak since May.

The greenback pared its third consecutive week of declines as traders refocused on the relative strength of the U.S. economy versus its major peers. Even though speculation about timing for an interest-rate increase has been pushed back, the Federal Reserve remains on course to tighten monetary policy before other major central banks. The outlook for the European Central Bank to expand its easing encouraged Executive Board member Benoit Coeure to express worry on Friday about the high expectations placed on policy.

“The Fed is almost certainly likely to lead most other major central banks in monetary normalization,” said Omer Esiner, chief market analyst at currency brokerage Commonwealth Foreign Exchange Inc. in Washington. “The data that we’ve seen has been good to shake out some of those dollar short positions,” which are bets against a currency.

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major counterparts, climbed 0.4 percent as of 5 p.m. New York time. The measure fell 0.2 percent for the week.

The dollar gained 0.3 percent to $1.1348 per euro Friday and added 0.5 percent to 118.44 yen.

Price Difference

U.S. economic reports on Friday added to expectations that the Fed will raise rates before too long. Industrial production met forecasts while a gauge of consumer sentiment rose for the first time in four months.

U.S. consumer prices excluding food and fuel climbed the most in three months in September, data Thursday showed. By contrast, euro-zone inflation has turned negative for the first time since the ECB started quantitative easing.

The probability the Fed will increase rates by its December meeting rose to 34 percent from 27 percent Wednesday, according to futures. The calculations are based on the assumption the effective fed funds rate will average 0.375 percent after liftoff, compared with the current range of zero to 0.25 percent.

“The U.S. rate cycle still looks to be on a different plane than the other central banks,” saidMitul Kotecha, head of foreign-exchange and rates strategy for Asia at Barclays Plc in Singapore. “We’re still constructive on the dollar, especially at these sort of levels where we’ve seen some weakness.”

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