Dollar set for weekly gain as firm US data tempers Fed easing bets

Reuters

18-07-2025

TOKYO, July 18 (Reuters) - The dollar headed for a second straight weekly gain against major peers, buoyed by some solid U.S. economic data that supported the view the Federal Reserve can afford to wait a while longer before cutting interest rates again.
The yen remained on the back foot heading into upper house elections on Sunday in Japan, with polls suggesting the ruling coalition is at risk of losing its majority - a development that would stir policy uncertainty and complicate tariff negotiations with the U.S.
Bitcoin hovered just below $120,000, after this week pushing to an all-time peak of $123,153.22, with Congress passing a bill to create the framework for dollar-pegged stablecoins.
The dollar index , which measures the currency against six leading counterparts, held steady at 98.456 as of 0038 GMT, keeping it on track for a 0.64% weekly advance and building on the previous week's 0.91% rally.
The dollar index climbed as high as 98.951 on Thursday for the first time since June 23 after U.S. data showed retail sales rebounded more than expected in June and first-time applications for unemployment benefits dropped to a three-month low last week.
Earlier in the week, a report showed consumer prices increased by the most in five months in June, suggesting tariffs were starting to have an impact on inflation.
Traders currently price about 45 basis points of rate cuts for the remainder of the year, down from closer to 50 basis points at the start of the week.
At the same time, the dollar index remains 9.3% lower over the course of this year, following a steep selloff in March and April when President Donald Trump's erratic trade policies undermined confidence in U.S. assets, sending the currency, Treasury bonds and Wall Street all lower.
Clouds of uncertainty still hang over the dollar though, which has been shaken in recent days and weeks by fiscal worries from Trump's massive spending and tax cut bill, as well as the U.S. President's relentless criticism of Federal Reserve Chair Jerome Powell for not cutting rates.
"The USD remains vulnerable to the downside if concerns about U.S. policymaking further undermine investor confidence in USD assets," Commonwealth Bank of Australia analysts wrote in a client note.
The U.S. currency's drop earlier this week on speculation Trump was aiming to oust Powell "was a case in point," the analysts said.
The dollar tumbled on Wednesday on a Bloomberg report that Trump was planning to fire Powell soon, before paring losses when Trump denied the news.
Trump has said repeatedly that interest rates should be at 1% or lower, compared with the current 4.25%-4.5% range.
The dollar was steady at 148.60 yen , hovering not far from the 3-1/2-month high of 149.19 from Wednesday, as signs grew that Japan's coalition would fall short of retaining its majority, potentially giving more sway to opposition parties that back consumption tax cuts to ease the burden on voters from rising prices. For the week, the dollar has gained 0.73% on the Japanese currency.
Japan, which initially was touted by the White House as likely to be among the first to reach a trade deal, has been deadlocked with Washington over politically sensitive issues of car and agriculture tariffs.
Japan's top trade negotiator, Ryosei Akazawa, held talks with U.S. Commerce Secretary Howard Lutnick on Thursday, as Tokyo races to avert a damaging 25% levy that would become effective after the August 1 deadline.
The euro rose 0.25% to $1.1626, clawing its way off Thursday's three-week low of $1.1556. For the week, the euro is down 0.59%.
Sterling rose 0.13% to $1.3436, slightly paring its weekly decline to 0.41%.
Bitcoin edged up 0.35% to around $119,899 on the day.