The dollar strengthened on Friday, extending its rebound against most major currencies, as traders reviewed the near-term outlook after the Federal Reserve cut interest rates this week but signaled gradual easing in the future.
The US Dollar Currency Index , which tracks the greenback against six major peers, rose 0.3 percent to 97.662. The gauge, which fell 1 percent on Monday and Tuesday on expectations the Fed might flag a rapid series of rate cuts, was about flat for the week.
For all latest news, follow The Daily Star’s Google News channel. On Wednesday, the Fed delivered an expected rate cut but signaled little urgency to lower borrowing costs quickly in the coming months. The Fed’s rate forecast, or the so-called “dot plot,” showed projections of two more rate reductions this year.
“It’s really a week of two halves,” said Marc Chandler, chief market strategist at Bannockburn Forex. “The votes, the actual dots, were not as dovish as the statement and the concerns about the labor market suggested.”
The US currency may have room to rebound further after facing selling pressure in the days ahead of the Fed decision. “What we’re telling our clients is that this is just a counter-trend move. If you have to sell dollars, you’ll have a better level shortly,” Chandler said.
Sterling fell on Friday after Britain’s borrowing surged past official forecasts, further complicating the country’s fiscal outlook, while the yen firmed after the Bank of Japan held rates steady, with dissent on the board.
The pound was one of the worst performers among G10 currencies, mirroring investors’ concerns that British finance minister Rachel Reeves may not be able to keep her budget under control.
The currency eased 0.6 percent to $1.3468 , on pace for its biggest two-day drop since early April.
“Despite a better reading from UK August retail sales data, poor UK government borrowing data have highlighted the difficulties Chancellor Reeves faces in delivering the UK budget in November,” said Jane Foley, head FX strategist at Rabobank.
Data published early on Friday showed British retail sales rose by a stronger-than-expected 0.5 percent in August, helped by sunny weather, but sales growth in July was revised slightly down.
