US Dollar Records Worst Weekly Close in 13 Months Amid Fed Rate Hike Plans

The US dollar currently struggles to backtrack from what could be its highest weekly fall in over a year on Friday, as investors pulled away from the greenback as they believe that the possible rate hikes this year have been fully priced in.

The dollar fell against most of its competitors following a data release that showed that the country’s inflation rate had returned to a 40-year high. With that, many traders have lightened their USD exposure until a clearer trend emerges.

The dollar index (DXY), which tracks the performance of the dollar against its six largest competitors, currently trades down by 0.94% for the week, its steepest weekly decline since December 2020. The weekly decline also brings an end to a six-month-long rally.

US Dollar Record Multi-Month Lows Against Competitors

The euro climbed over 1% against the dollar this week, helping it nullify its previous range-bound status seen since November 2021. The EUR/USD peaked at 1.1482 in the early Asian session today and appears unrestrained from reclaiming the upper 1.1500s.

The dollar also dropped against the Japanese yen by over 1.5% this week, its worst weekly candle since June 2020, and refreshed the December 2021 low at 113.63. The yen received a modest boost from the recent slide in global stocks, which triggered an increased appetite for safe-haven currencies like the yen. Meanwhile, Reuters recently revealed that the Bank of Japan (BoJ) is brainstorming ways to start telegraphing a possible rate hike.

As mentioned earlier, the greenback’s woes come as the market price in four possible rate hikes this year. However, longer-term yields have dropped mildly following comments from Fed officials on possibly tapering the apex bank’s balance sheet.