Dollar near one-week high; yuan gains on strong inflation data

Shafaq News/ The dollar hovered close to a one-week high against major rivals on Friday, after the biggest drop in US jobless claims in close to a year allayed fears of a looming economic downturn.

China's yuan gained following a stronger-than-expected inflation reading and a firmer official exchange-rate fixing.

The US currency was steady against the Japanese yen following a three-day rebound, supported by a spike in Treasury yields as Thursday's firmer-than-expected employment data spurred a paring back in bets for Federal Reserve interest rate cuts this year.

The yen and fellow safe-haven currency Swiss franc hung near one-week lows as Asian equities built on an overnight rally on Wall Street, while riskier currencies such as the Australian dollar and sterling stayed elevated.

Markets have endured a turbulent week, triggered in large part by surprisingly soft US payrolls figures a week ago that sent global stocks tumbling, while demand for the safety of assets such as the yen and the Swissie sent the currencies surging to their highest levels since the start of the year on Monday.

The dollar edged down 0.1% to 147.08 yen as of 0450 GMT, on course for an advance of around 0.4% this week, despite Monday's precipitous 1.5% plunge.

It eased 0.1% to 0.8659 franc, on track for a 1% weekly advance.

Initial claims for state unemployment benefits fell 17,000 to a seasonally adjusted 233,000 for the week ended Aug. 3, the largest drop in about 11 months. Economists polled by Reuters had forecast 240,000 claims for the latest week.

The odds of the Federal Reserve cutting interest rates by 50 basis points at its next policy meeting on Sept. 17-18 fell to 54%, from 69% a day earlier, with a 25 basis point cut now seen as having a 46% probability, according to the CME Group's FedWatch Tool.

"Despite the volatility in claims data, especially around this time of year, the data helped allay fears of a more rapid deterioration in the labour market," said Taylor Nugent, senior markets economist at National Australia Bank.

The outsized Wall Street rally, which spurred the flight from the yen and Swiss franc, was "an unusual reaction to a such a volatile weekly print ... underscoring the market's sensitivity to labour market indicators after Friday's soft payrolls," he said.

UNWINDING OF SHORT YEN DONE?

The yen had shot higher this month, reaching the strongest since Jan. 2 at 141.675 per dollar on Monday, as an unwinding of short positions snowballed following a surprise rate hike by the Bank of Japan amid weakness in US economic indicators.

Commodity Futures Trading Commission figures later on Friday will give a clearer indication of whether that unwinding has now run its course.

The dollar index , which measures the currency versus the yen, Swissie, euro, sterling and two other peers, was 0.1% lower at 103.17 following three days of gains. It rose as high as 103.54 at one point overnight for the first time since Aug. 2, but was last trading little changed from a week ago.

The euro was little changed at $1.0921, up 0.1% from a week ago. On Monday, the shared currency soared as high as $1.1009 for the first time since Jan. 2.

Sterling was steady at $1.2756, after a 0.49% rally overnight that yanked it back from a more than one-month low. However, it remained on course for a 0.4% slide this week, which would be a fourth straight week of declines.

The Aussie was stable at $0.6595 after earlier touching $0.6604 for the first time since July 24, given additional support from the Reserve Bank of Australia governor's hawkish comments a day earlier. It is up 1.24% this week.

The New Zealand dollar reached a three-week high of $0.6035 before last trading up 0.2% on the day at $0.6026. That's in spite of a drop in inflation expectations that has traders now pricing 80% odds of a quarter point rate cut when the central bank sets policy on Wednesday.

The Chinese yuan strengthened about 0.3% to 7.1651 per dollar in offshore trading . China's consumer price index rose 0.5% in July from a year earlier, accelerating from a 0.2% pace in June and topping the 0.3% increase forecast by economists.

Elsewhere, leading cryptocurrency bitcoin reached a one-week high of $62,717, and last traded about 3.3% higher at $61,500. For the week, it was up about 4%.

(Reuters)