Dollar Sheds Gains Following Rally to Multi-Decade Top

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The US dollar lost some points against other top currencies on Friday, following a volatile week for the asset, as investors focused on the Federal Reserve’s outlook and efforts to curb rising inflation.

The dollar index (DXY) tapped a multi-decade high of 104.07 overnight amid increased safe-haven demand after a sharp sell-off witnessed in the stock and cryptocurrency market on Thursday after the Fed rate decision.

Dollar Declines as Investors Evaluate Effect of Fed Hawkish Stance

That said, the DXY gave up some of its gains on Friday, about 0.1%, as investors assessed how much of the central bank’s hawkishness had been priced. Also, some analysts argued that inflation may be nearing a peak.

Meanwhile, US economic data from the Labor Department on Friday showed that new job creation grew at a faster rate than anticipated in April. This reduced the year-on-year (YoY) increase in wages to 5.5% from 5.6% in March.

Commenting on the jobs data, Peter Cardillo, the chief market economist at Spartan Capital Securities, noted:

“The good news is that wages were not going up as fast as they were, and that should begin to calm down that speculation. The market will have to recognize that maybe inflation is peaking.”

Speaking on the volatility seen in the market, Juan Perez, the director of trading at Money USA, stated:

“Perhaps today is a day for settling down and seeing less action after two very turbulent days that ultimately leave us at where we started for the week dollar-wise.” Perez added that: “Wages are still nothing stellar while inflation is the main focus for all outlooks.”

Finally, Minneapolis Fed President Neel Kashkari asserted last Friday that the Fed needs to raise its rates at a more aggressive pace to tackle inflation. He also noted that the economy was at risk of a recession if supply chain problems fails to soften soon.