Dollar set for weekly loss as Fed hike bets fade

The US dollar weakened on Friday and was on course for its first weekly decline in more than a month against both the euro and the Japanese yen, according to a Reuters report carried by Business Recorder. The move was attributed to fading expectations for a further Federal Reserve interest rate hike and to lingering stress from a selloff in artificial-intelligence-related equities.

The dollar index, which measures the US currency against six major peers, fell 0.42 percent to 101.61 in New York trade and was set for a drop of about 0.6 percent over the week. Earlier in the same session, Reuters had reported the index down 0.25 percent at 101.77 and tracking a 0.45 percent weekly fall, indicating the currency extended its losses as the day progressed. The index rose in two of the week's five sessions, including Wednesday, when hotter-than-expected inflation data more than offset the drag coming from the technology-share selloff.

The euro was quoted up 0.14 percent at $1.1235 after climbing 0.56 percent on Thursday, its largest single-day gain in two months, leaving it on track for a weekly rise of roughly 0.39 percent. Against the yen, the dollar weakened 0.12 percent to 157.79, putting the Japanese currency on course for a weekly gain of about 0.33 percent. That would end a run of four consecutive weekly declines for the yen, a stretch during which the conflict involving Iran had supported demand for the greenback.

The backdrop for the week was turbulence in AI-linked equities. Reuters reported that AI stocks cratered during the week and that the stress spread to parts of the credit market, with investors who have crowded into positions across the AI supply chain concerned that data-centre operators may not become profitable quickly enough to service their debts. At the same time, worries about an escalation of the Iran conflict faded, removing part of the safe-haven bid that had previously favoured the dollar.

Market participants quoted by Reuters framed the move as a tug-of-war between rate expectations and risk sentiment. Marc Chandler, chief market strategist at Bannockburn Capital Markets in New York, said interest rates had been the main driver of the dollar since mid-June under a hawkish Federal Open Market Committee, but that now "concerns about the sustainability of AI is offsetting that."

Chris Turner, foreign exchange strategist at ING, struck a more cautious tone on the scale of the dollar's pullback, saying that barring another large downward leg in AI stocks and risk assets generally, the currency could consolidate near recent highs. He added: "It is only when short-end rates break lower that the dollar is ready to drop."

The week's price action followed an inflation report that came in above expectations, which briefly lifted the dollar mid-week before softer rate-hike expectations and the equity selloff reasserted themselves. Attention across currency markets has centred on the path of US short-term interest rates, with the October Federal Reserve policy meeting the next scheduled event that could shift those expectations.

All figures cited are intraday snapshots from Friday's trading session as reported by Reuters and can change quickly as markets continue to trade. Weekly performance numbers were provisional at the time of publication and depend on where the pairs settle at the close. Readers should consult live quotes and the original source for the most current levels.

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