The dollar pulled back from a six-month high as dovish comments from Federal Reserve officials revived speculation that the central bank may keep interest rates at current levels.
(Bloomberg) — The dollar pulled back from a six-month high as dovish comments from Federal Reserve officials revived speculation that the central bank may keep interest rates at current levels.
The Bloomberg Dollar Spot Index retreated 0.1%. The moves came after Fed Bank of New York President John Williams said in a discussion on Thursday that US monetary policy is “in a good place.”
Meanwhile, stocks edged lower. Europe’s Stoxx 600 Index was on track for an eighth day of losses, the longest streak since 2016. Futures on the S&P 500 index and Nasdaq 100 slipped 0.1%.
Stock markets have been hit this week by data hinting at a deepening economic downturn in Europe and China. The mood is especially pessimistic toward European markets, which saw a 26th straight week of investment outflows, according to a note from Bank of America Corp.
Read More: BofA’s Hartnett Says Higher-for-Longer Rates Set to Hurt Stocks
Still, the biggest narrative of the week has been the dramatic moves in currencies and the widening gulf in economic growth prospects between the US and the rest of the world. The Bloomberg Dollar Spot Index is still on track for an eighth consecutive week of gains, which would be the longest run of increases in data going back to 2005.
“The dollar upside we have seen recently has surprised our expectations,” Laura Cooper, senior investment strategist at BlackRock International, said in an interview on Bloomberg Television. “We question the sustainability of that, largely as we look forward to the Fed, we think it is going to signal a hawkish pause.”
New York Fed chief Williams said policy is having the desired effects of bringing demand and supply more into balance and easing inflation, adding that the Fed has “done a lot” by raising interest rates significantly. At the same time, officials must calibrate policy if needed to ensure they’re bringing inflation sustainably down to their 2% goal.
Read More: Fed’s Williams Says Policy in Good Place, Must Be Data Dependent
In China, the offshore-traded yuan approached the lowest level on record and a cut to the daily reference rate stoked bets that officials are comfortable with a gradual depreciation.
Meanwhile, European benchmark gas prices jumped as much as 11% and Brent oil held near $90 a barrel. Liquefied natural gas workers at key Chevron Corp. sites in Australia began partial strikes on Friday after talks failed to reach an agreement.
Key events this week:
- US wholesale inventories, consumer credit, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 7:04 a.m. New York time
- Nasdaq 100 futures fell 0.2%
- Futures on the Dow Jones Industrial Average fell 0.1%
- The Stoxx Europe 600 fell 0.1%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro was little changed at $1.0703
- The British pound was little changed at $1.2480
- The Japanese yen was little changed at 147.39 per dollar
Cryptocurrencies
- Bitcoin fell 0.5% to $25,863.81
- Ether fell 0.7% to $1,627.1
Bonds
- The yield on 10-year Treasuries was little changed at 4.24%
- Germany’s 10-year yield was little changed at 2.60%
- Britain’s 10-year yield was little changed at 4.44%
Commodities
- West Texas Intermediate crude rose 0.6% to $87.30 a barrel
- Gold futures rose 0.2% to $1,947.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson and Michael Msika.
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