By William L. Watts and Carla Mozee, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar hovered near unchanged Friday, consolidating losses accrued this week in a summer trading environment as market participants debate when the Federal Reserve will begin to slow the flow of monetary stimulus to the U.S. economy.
The ICE dollar index DXY +0.06% , which tracks the U.S. currency’s movement against six rivals, traded at 81.017, compared with 81.028 late Thursday, leaving it on track for a weekly decline of 1.1%.
“As we end the week, it looks as though dollar weakness is set to persist, as U.S. yields remain susceptible to downside risks,” said Jeremy Stretch, currency strategist at CIBC in London.
The WSJ Dollar Index XX:BUXX -0.08% , which uses a slightly wider comparison basket, fell to 73.34 from 73.36, marking a 1.5% setback from a week ago.
The dollar has remained under pressure since last Friday’s report that the U.S. economy created a less-than-expected 162,000 jobs in July. This added uncertainty as to when the Federal Reserve will start slowing the pace of asset purchases that some consider to be a weight on the value of the greenback.
The dollar didn’t find much support after a number of Fed officials this week said tapering of bond purchases looked likely to occur by the end of the year. The U.S. unit also declined along with U.S. Treasury yields, as the bond market ran into technical factors that have pushed yields lower.
“We need to see evidence of continued data gains to back … assumptions” the Fed will begin to taper as early as September, Stretch said. This presents a problem given a light economic-data calendar Friday and over coming days, Stretch added, noting that the news flow is set to pick up next week with retail-sales figures and forward-looking manufacturing-sentiment data.
“Until then, aside from any late-week consolidation moves, the dollar appears set to remain on the defensive,” Stretch said, with only a weekly close above the ICE 81.15 level capable of unwinding fears of a slide back toward the June lows.
The euro and the British pound on Friday hovered near multiweek highs against the greenback, while the Australian dollar extended gains following largely upbeat economic reports from China, Australia’s largest export market.
The euro EURUSD -0.1278% on Friday slipped to $1.3371 from a level of $1.3384 late Thursday, while the British pound GBPUSD -0.1770% was little changed at $1.5532 versus Thursday’s level of $1.5537. But each currency hit highs not seen in seven weeks after a batch of encouraging European data this week, including stronger-than-expected manufacturing orders in Germany and the strongest growth in U.K. industrial production since 2010.
PMI readings and other recent sentiment indicators “currently point to a switch from negative to positive gross-domestic-product growth in the third quarter,” Handelsbanken head of macro research Jan Häggström told clients this week.
“However, growth rates for the next 2-3 years will be weaker than that expected in a normal recovery. Private-sector debt overhangs, together with weak banks and the need to consolidate public finances, will continue to hold domestic demand down,” said Häggström. “The euro zone is relying more on a global trade recovery than the U.S., and we think that a weaker euro must be part of a growth recipe for the euro zone.”
The Aussie dollar AUDUSD +0.6937% , meanwhile, hit an intraday high of 91.71 U.S. cents after China said industrial production rose 9.7% in July from a year ago, the fastest pace of growth since February. Retail-sales growth slowed slightly, to 13.2% from 13.3% in June.
The Aussie, which has been battered on expectations of further interest-rate cuts as local growth loses steam, on Thursday recaptured 91 U.S.- cents-level for the first time in two weeks after China’s trade figures for July surpassed expectations.
Against the Japanese yen, the dollar USDJPY -0.4567% bought 96.54 U.S. cents, down from ÂĄ96.68 on Thursday. The dollar on Thursday slipped below the ÂĄ96 level for the first time since mid-June.
The WSJ Dollar Index XX:BUXX -0.08% , which uses a slightly wider comparison basket, fell to 73.34 from 73.56.
William L. Watts is MarketWatch's senior markets writer, based in New York. Follow him on Twitter @wlwatts.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
