(Updates prices)
The dollar index climbed to its highest in almost two weeks on Friday after encouraging retail sales data for May released ahead of a Federal Reserve policy meeting next week eased fears that the U.S. economy is slowing sharply.
The Commerce Department said retail sales rose 0.5% last month, just below economists’ expectations of a 0.6% gain. Data for April was revised up to show retail sales gaining 0.3%, instead of dropping 0.2% as previously reported.
The dollar index against a basket of currencies .DXY was last 97.35, up 0.53% on the day and the highest since June 3.
The dollar has recovered in the last week from a weak start to June, as investors consider whether expectations for U.S. interest rate cuts have gotten too far-fetched relative to the data.
With international economic growth slowing, investors are nervous that U.S. President Donald Trump will impose tariffs on Japan and Europe, which could result in more dovish central banks globally and give the dollar a relative advantage.
The U.S. economy is also seen as better placed to handle trade tensions than other countries.
The dollar “has benefited to date from negative globalization news as the domestic side of the U.S. economy has looked sufficiently robust to deal with trade-related headwinds,” Morgan Stanley analysts said in a report on Friday.
“Other countries look less resilient in the face of trade tensions due to higher exposure to global import demand, dependence on manufacturing exports, and underdeveloped domestic demand,” they said.
Chinese data on Friday flashed more warning signs, with industrial output growth unexpectedly slowing in May to a more than 17-year low and investment cooling, underlining a need for more stimulus.
The Fed is not widely expected to lower rates when it meets on June 18-19, though investors will watch for new signals that a cut by the U.S. central bank may come in July.
Interest rate futures traders are pricing in a 23% chance of a cut in June, and an 87% likelihood of at least one cut in July, according to the CME Group's FedWatch Tool.
The other major catalyst for the dollar in the near term is whether the United States and China will renew trade negotiations at the G20 summit on June 28-29.
Trump said on Friday it didn’t matter if Chinese President Xi Jinping attends the summit, adding that China would eventually make a trade deal with the United States.
======================================================== Currency bid prices at 1:58PM (1758 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1209 $1.1275 -0.59% -2.27% +1.1289 +1.1203 Dollar/Yen JPY= 108.5300 108.3700 +0.15% -1.57% +108.5800 +108.1700 Euro/Yen EURJPY= 121.66 122.20 -0.44% -3.61% +122.2700 +121.5900 Dollar/Swiss CHF= 0.9986 0.9936 +0.50% +1.75% +0.9995 +0.9926 Sterling/Dollar GBP= 1.2591 1.2672 -0.64% -1.30% +1.2682 +1.2589 Dollar/Canadian CAD= 1.3403 1.3324 +0.59% -1.72% +1.3407 +1.3323 Australian/Dollar AUD= 0.6863 0.6913 -0.72% -2.64% +0.6918 +0.6862 Euro/Swiss EURCHF= 1.1196 1.1205 -0.08% -0.51% +1.1227 +1.1196 Euro/Sterling EURGBP= 0.8901 0.8896 +0.06% -0.92% +0.8917 +0.8891 NZ Dollar/Dollar NZD= 0.6488 0.6567 -1.20% -3.41% +0.6573 +0.6489 Dollar/Norway NOK= 8.7145 8.6777 +0.42% +0.88% +8.7210 +8.6631 Euro/Norway EURNOK= 9.7683 9.7899 -0.22% -1.39% +9.7968 +9.7696 Dollar/Sweden SEK= 9.4864 9.4814 -0.55% +5.83% +9.4992 +9.4240 Euro/Sweden EURSEK= 10.6363 10.6950 -0.55% +3.63% +10.7123 +10.6260
