NEW YORK –The dollar fell as investors evaluated how high the Federal Reserve is likely to raise interest rates by when it meets later this month and as investors took profits after a strong rally that sent the greenback to a two-decade high on Thursday.
The greenback has jumped as the Fed is expected to raise rates faster and further than peer central banks as inflation soars to four-decade highs.
The dollar briefly gained on Friday after data showed that US retail sales increased more than expected in June.
“It’s a little bit better than expected, but I think everyone realizes that probably that is due to inflation,” said Joseph Trevisani, senior analyst at FXStreet.com in New York. He added that investors are closing positions before the weekend, and after “a long, strong run in the dollar.”
Other data showed that manufacturing production slumped for a second straight month in June and US consumers tempered their inflation expectations in July.
The dollar index fell to 108.04, down 0.47 percent on the day. It reached 109.29 on Thursday, the highest since September 2002.
The euro gained 0.57 percent to $1.0080. It traded as low as $0.9952 on Thursday, the weakest since December 2002.
Traders ramped up bets that the Fed will hike rates even faster after data on Wednesday showed US annual consumer prices jumped 9.1 percent in June, the largest increase in more than four decades.
Odds of a 100 basis points move fell, however, after two of the most hawkish Fed officials on Thursday said they would prefer a 75 basis points hike.
