Dollar dips after bounce, US GDP awaited for potential support
The greenback had sunk to 13-month low midweek on Fed statement of easing pace of interest rates hikes
The dollar dipped against its major peers on Friday, its mild bounce earlier petering out ahead of the second quarter US economic growth data.
The dollar index against a basket of six major currencies was a shade lower at 93.826 after edging up 0.2 per cent the previous day.
The greenback, which had sunk to a 13-month low midweek after the Federal Reserve's policy statement suggested it was in no hurry to raise interest rates again, received a lift on Thursday as Treasury yields rose on the back of upbeat US durable goods and trade data.
Market focus was now on second quarter U.S. gross domestic product.
Economists expect the world's largest economy to have grown around 2.6 per cent in the second quarter, from 1.4 per cent in the first quarter. A solid outcome will no doubt give the beleaguered dollar some respite from the recent sell-off.
Dollar bulls have not had much to cheer about recently, hobbled by investigations into US President Donald Trump administration's ties to Russia and the reduced likelihood of tax reform and infrastructure spending being enacted soon.
"The dollar's fall after the Fed meeting looked overdone, so it was natural for it to rebound," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
"And the dollar could find more bids if U.S. economic data turns out to be strong. That said, we are unlikely to see a return to the days when the dollar was the lone winner, because other countries are joining the Fed in trying to normalize monetary policies."
The euro is one of the currencies that has benefited from expectations the European Central Bank will begin phasing out its monetary easing sooner rather than later. It has gained roughly 11 per cent against the dollar so far this year.
The common currency was last up 0.1 per cent at US$1.1686. It had fallen about 0.5 per cent overnight, when it was knocked off a 2-1/2-year high of $1.1777. The euro was on track to rise 0.2 per cent on the week.
The Swiss franc extended its slide against the buoyant euro, touching 1.1364 francs per euro. It was the franc's weakest since January 2015, when the Swiss National Bank (SNB) removed its cap on the currency.
"The traditionally close correlation between the euro and Swiss franc is changing, as expectations that the ECB would begin tapering its easy policy are becoming very strong," said Masashi Murata, senior strategist at Brown Brothers Harriman.
"The SNB, on the other hand, obviously does not want a strong franc. The policy divergence between the ECB and the SNB has been overlooked for a while but is now a theme being traded upon."
Investors expect the SNB to keep monetary policy loose while other central banks move towards tightening.
The dollar was down 0.2 per cent at 111.070 yen to reverse the previous day's modest gains. It was poised to lose 1.2 per cent this week, during which it fell to a six-week low of 110.625.
The Australian dollar was 0.1 per cent higher at $0.7975.
The Aussie has advanced strongly as the dollar floundered through most of the week, soaring to a 26-month high of $0.8066 on Thursday. Higher prices of commodities such as copper and iron ore have also supported the currency.
The New Zealand dollar stood at $0.7487 after rising to $0.7557 on Thursday, its highest since May 2015.
Updated: July 28, 2017 08:50 AM