The U.S. dollar weakened on Friday after U.S. retail sales were unexpectedly flat in July, while producer prices also unexpectedly fell in the month, raising concerns about the strength of third-quarter economic growth.
Economists had forecast overall retail sales to rise 0.4 percent. The drop in producer prices, meanwhile, was the first decline since March and the largest since September 2015.
“The U.S. retail sales data in particular is causing the dollar to weaken,” said Nick Bennenbroek, head of currency strategy at Wells Fargo Securities in New York.
“The soft U.S. figure and its potential implications for Federal Reserve policy is probably going to be the most notable driver of the markets for the balance of today’s session,” Bennenbroek said.
The dollar dropped 0.46 percent against a basket of six major currencies to 95.412, after falling as low as 95.254, the lowest in a week. The greenback also tumbled 0.89 percent against the yen to 101.05 and 0.57 percent against the euro to $1.1197.
The dollar had rallied a week ago after data showed that employers added more jobs than expected in July, raising expectations the Federal Reserve will raise rates this year.
It gave up those gains this week, however, as investors see a rate hike in September as a long shot and with the Fed’s December meeting still far away.
The Fed will release minutes from its July meeting next Wednesday, with the focus then likely to turn to Chair Janet Yellen’s speech at the Fed’s Jackson Hole symposium on Aug. 26.
Asian and antipodean currencies reversed earlier weakness on the U.S. data. They fell overnight after data showed China’s economic activity slowed in July, with investment growing at its slowest pace since the turn of the century.
The weaker-than-expected Chinese data covered investment, lending, retail spending and factory output.
The Australian dollar was up 0.27 percent against the greenback to $0.7715, after earlier falling to $0.7671. The New Zealand dollar gained 0.57 percent against the U.S. dollar to $0.72454 after earlier falling to $0.7186.
The kiwi and Australian dollar have been buoyed this week by investors reaching for yields as European and Japanese bond yields offer, in many cases, negative returns. (Reuters)