The US dollar headed toward a weekly loss on Friday, as investors trimmed positions while awaiting a clearer assessment of the backlog of US economic data following the government’s reopening.
Traders sold the US currency despite rising yields and declining expectations of a Federal Reserve rate cut next month. The moves came alongside broad selling in US equities and bonds, which extended into Asian stock markets on Friday.
Ray Attrill, head of FX strategy at National Australia Bank (NAB), said: “There’s a whiff of a return to ‘sell America’ in the air.”
A growing number of Federal Reserve officials have signaled caution toward additional easing, citing inflation concerns and signs of relative stability in the labor market.
Even so, the shift toward a more hawkish stance failed to support the dollar, which fell to a two-week low versus the euro in the previous session. The single currency rose above 1.16 dollars and was last up 0.1% at 1.1644 dollars.
The Swiss franc also held near its strongest level in more than three weeks, trading at 0.7919 per dollar. Meanwhile, the US Dollar Index hovered near a two-week low at 99.14, on track for a weekly decline of 0.4%.
Joseph Capurso, head of international and geopolitics FX research at Commonwealth Bank of Australia, said markets will begin receiving a flood of delayed US data next week, adding: “We think it’s going to be very bad.”
Under normal circumstances, such data would reinforce expectations for further rate cuts to support the economy, but the expected fragmentation of upcoming releases may explain why rate expectations have shifted in the opposite direction.
The White House also noted that the October unemployment rate may not be published at all, as the household survey underpinning the data was not conducted during the shutdown.
“When you’re in the fog, you drive slowly… and when you don’t know what’s happening in the economy, you may slow the pace of easing,” Capurso said.
Investors are currently pricing a better-than-50% chance of a 25-basis-point rate cut in December, while a January cut is almost fully priced in. Expectations for 2026 remain largely unchanged.
Asia saw an active session in currencies, with sharp moves in the British pound and the Korean won, while China’s onshore yuan strengthened to its highest level in more than a year.
Sterling fell 0.3% to 1.3152 dollars after failing to hold overnight gains of 0.45% against the weaker dollar. The decline followed a Financial Times report that UK Prime Minister Keir Starmer and Finance Minister Rachel Reeves had abandoned plans to raise income tax weeks before the November 26 budget announcement.
“If that means fiscal tightening won’t be as severe as expected, it could be less harmful for the economy — but foreign investors in UK bonds will worry more about the underlying fiscal position,” said NAB’s Attrill, describing the market’s quick negative reaction as justified.
The Korean won jumped 1% against the dollar after authorities pledged measures to support the currency, amid speculation of direct intervention via dollar sales.
The Japanese yen found some support from the weaker dollar but remained near a nine-month low, trading at 154.51 per dollar and still heading for a weekly loss of 0.7%.
In Australia, the Australian dollar remained under pressure after falling in the previous session amid risk aversion linked to expectations of higher-for-longer US rates. The aussie rose 0.11% to 0.6538 dollars, while the New Zealand dollar gained 0.6% to 0.5687 dollars, supported by data showing a pickup in industrial activity in October and news that the Reserve Bank of New Zealand would ease mortgage-lending restrictions from December 1.
In China, the onshore yuan hit a one-year high at 7.0908 per dollar, supported by exporter-driven dollar selling after a key technical level was breached.
Friday’s data showed China’s industrial output and retail sales posting their weakest growth in more than a year in October, while new home prices recorded their fastest monthly decline in twelve months.
