Dollar Gains Ground as Recession Worries Ease

16 Aug 2024 , 11:18 AM

The dollar stayed at a two-week high against the yen on Friday, following its biggest one-day gain against major peers in four weeks as strong US economic data all but dispelled fears of a recession.

The US dollar gained ground against the Japanese yen on Thursday as traders reduced their wagers that the Federal Reserve will be forced to engage in aggressive easing next month.

Sterling and other risk-sensitive currencies strengthened as the improving economic outlook fuelled an equities rally.

The dollar index, which measures the greenback against six major peers, including the yen, sterling, and euro, fell 0.12% to 102.92, following a 0.41% overnight surge, the most since July 18.

The dollar fell 0.24% to 148.935 yen, but remained near to Thursday’s high of 149.40, last set on August 2. The 10-year Treasury yield fell a little more than 2 basis points to 3.9035% in Asian hours.

On Thursday, the Commerce Department reported that retail sales increased by 1.0% last month, exceeding expectations of a 0.3% increase. Separate numbers show that 227,000 Americans claimed for jobless benefits last week, fewer than the projected 235,000.

Traders are confident that the Fed will cut interest rates on September 18, but they disagree on the extent of the reduction. According to the CME Group’s FedWatch Tool, the odds for a super-sized 50 basis-point decrease are now 25%, down from 36% the previous day.

Surprisingly disappointing monthly payroll figures at the start of the month increased the probability of a greater cut to 71%.

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