NEW YORK- The dollar drifted higher on Friday after three straight days of losses, and riskier currencies fell, as bleak non-US economic data gave global equity markets reason to pause after another week of record highs.
As a safe haven, the US currency tends to rise in times of financial and economic stress that results in lower risk appetite.
The S&P 500 and the Dow along with US Treasury yields were lower as well, suggesting a generally somber mood in financial markets.
The dollar did pare gains and riskier currencies cut losses earlier after upbeat US economic data – a rise in factory activity to its highest in more than 13 years in January and an unexpected 0.7 percent gain in existing home sales.
The greenback had fallen against a basket of currencies for the past three sessions as market optimism about new US President Joe Biden’s fiscal stimulus plans prompted traders to seek riskier assets, producing gains in currencies such as the New Zealand and Australian dollar.
But that trend paused on Friday, as market sentiment pulled back. Global shares slipped off record highs as the US dollar steadied, up 0.1 percent on the day at 90.209.
The dollar index though still posted its biggest weekly loss since mid-December.
“There is some indecision in the marketplace and risk sentiment has been soured a little bit,” said Amo Sahota, executive director at currency advisory firm Klarity FX in San Francisco.
“The market has probably one eye on the Fed meeting next week, where they will likely throw a little bit more caution in the marketplace given the slower vaccine rollout and prolonged virus uplift globally.”
US coronavirus deaths have now reached nearly 410,000, with close to 25 million cases.
The Federal Reserve next week will hold its first monetary policy meeting of the year and strategists expect the Fed to stay dovish, and officials “will probably note signs of slowing in the economy since the December meeting,” NatWest Markets said in a research note.
Gloomy economic data also did little to brighten the mood, as UK data showed British retailers struggled to recover in December.
