Dollar falls on worries about what US data fog clearing might show

SINGAPORE: The dollar struggled to claw back heavy losses on Friday and was on track for a weekly decline, as investors awaited a backlog of US data after the government reopened, which they expect will point to a weaker economy.

The overnight lower move in the dollar came with a sell-off in US equities and bonds that was reminiscent of market turmoil in April, as investors watched the Federal Reserve cut rates in December.

“The US is in the air to sell again,” said Ray Attrill, head of FX research at National Australia Bank.

However, expectations of a more hawkish Fed failed to lift the dollar, which fell to a two-week low against the euro overnight. The common currency rebounded above the $1.16 mark and last bought $1.1630.

The Swiss franc similarly held near a three-week high and was steady at 0.7933 per dollar. Against a basket of currencies, the greenback hovered near a two-week low at 99.27.

The dollar index was led by a weekly decline of 0.3%.

“Starting next week, we’re going to get a lot of economic data from the US, and we think it’s going to be pretty bad. I think the market is now preparing for the coming flood of weak US economic data,” said Joseph Capurso, head of foreign exchange, international and geoeconomics at the Commonwealth Bank of Australia.

While that would fuel expectations of more aggressive Fed easing to prop up a generally weakening economy, Caperso said the looming lackluster data release could explain why Fed funds futures have moved the other way.

The White House indicated that the US unemployment rate for October may never be available, as it is based on a household survey that was not conducted during the shutdown.

“When you’re in a fog, you drive slower… When you don’t know what’s going on in the economy, maybe you slow down your cuts,” Capurso said.

While investors see a less than 50% chance of a 25-basis-point cut in December, the likelihood of such a move in January is almost fully priced. Rate expectations for 2026 have also barely advanced.

In other currencies, sterling fell 0.3% to $1.3152, failing to sustain its 0.45% overnight gain against the weaker dollar.

The move lower in the pound came after the Financial Times reported that British Prime Minister Keir Starr and Finance Minister Rachel Reeves had abandoned plans to raise income tax rates in a drastic change just weeks before the November 26 budget.

“Weakening of fiscal resolve due to political uncertainty is not good news for GBP,” said Sim Moh Siong, currency strategist at Bank of Singapore.

A pullback in the dollar provided some relief to the beleaguered yen on Friday, although it remained pinned near a nine-month low hit earlier this week. It was last at 154.58 per dollar.

The Japanese currency was on track for a decline of about 0.8% for the week.

Down under, the Australian dollar fell 0.02% to $0.6529, having fallen overnight on broader risk-off sentiment.

The New Zealand dollar last bought $0.5654, down 0.25% in the previous session.