Data from the U.S. Labor Department on Thursday showed the producer price index (PPI) fell by the most in nearly three years last month, coming a day after inflation data pointed to moderation in consumer prices.
The greenback took another leg down following Thursday’s data release, with the dollar index sinking to a two-month low of 100.84 in the previous session.
It last stood at 100.95 in early Asian trade, and was headed for a weekly decline of more than 1%, its steepest since January.
Meanwhile, the euro rose 0.07% to $1.1055, after surging to a one-year top of $1.1068 on Thursday.
The British pound was similarly perched near a 10-month high and last bought $1.2526.
“The easiest way to express a dollar negative view has been with the euro,” said Ray Attrill, head of FX strategy at National Australia Bank. “The significant downside surprise in U.S. PPI has made people a bit more convinced of the view that the Fed will (soon) be done … and (strengthened) conviction that inflation will allow the Fed to be cutting rates before the end of the year,” said Attrill.
Money markets are pricing in a 69% chance the Fed will raise interest rates by 25 basis points next month, though a series of cuts are also being priced in from July through to the end of the year, with rates seen just above 4.3% in December.
Adding to the hope that global inflationary pressure is waning was an unexpected surge in Chinese exports, which in March shot up 14.8% from the same month a year earlier, stunning economists who predicted a 7.0% fall in a Reuters poll.
The upbeat Chinese data, alongside a robust March employment report in Australia, kept the Australian dollar supported at around $0.6788 on Friday, having surged 1.3% in the previous session on the back of the data releases. The Australian and New Zealand dollars are often used as liquid proxies for China’s yuan.
“It was almost like a perfect positive storm for the Aussie,” said Attrill. “Starting with the employment numbers … and the China trade numbers which looked exceptionally good.
“You layer on top of that, the dollar weakness from the data last night and positive risk sentiment, and it was a (raft) of good news for the Aussie.”
The New Zealand dollar similarly gained 0.13% to $0.6305 in Asia trade, after jumping 1.3% on Thursday.
Elsewhere in Asia, Japan’s yen rose marginally to 132.44 per dollar, while the offshore yuan edged about 0.1% higher to 6.8635 per dollar
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