# Dollar steadies near 16-week low, yuan set for biggest weekly gain since 2005
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-12-02
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Dollar near 16-week lows against major currencies ahead of
Meta Description: Stay updated with the latest on USD at 16-week lows against major currencies. Find out how Fed's pivot stance impacts rate hikes and the market.
URL: https://financedigest.com/dollar-steadies-near-16-week-low-yuan-set-for-biggest-weekly-gain-since-2005html

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By Samuel Indyk

LONDON (Reuters) – The dollar was pinned near 16-week lows against a basket of major currencies on Friday ahead of key U.S. labour market data, while the yuan was [set for its biggest weekly gain](https://www.financedigest.com/european-shares-set-for-weekly-gain-on-u-s-inflation-outlook.html "European shares set for weekly gain on U.S. inflation outlook") since China revalued its currency in 2005.

The dollar index, which measures the [currency against six major](https://www.financedigest.com/u-s-dollar-advances-vs-major-currencies-as-risk-appetite-fades.html "U.S. dollar advances vs major currencies as risk appetite fades") peers including the yen and euro, fell 0.1% to 104.55, having earlier touched its lowest level since June 29 at 104.36.

The index slipped over 5% last month on expectations that the Federal Reserve would start to slow its pace of [rate hikes](https://www.financedigest.com/uk-economys-unexpected-bounce-spurs-more-boe-rate-hike-talk.html "UK economy’s unexpected bounce spurs more BoE rate hike talk") from the December meeting.

Data released on Thursday supported that view, with the core personal consumption expenditures (PCE) [price index coming in below expectations](https://www.financedigest.com/ecb-survey-shows-rising-inflation-expectations-despite-energy-price-falls.html "ECB survey shows rising inflation expectations despite energy price falls"). The Fed tracks the PCE price indexes for its 2% [inflation target](https://www.financedigest.com/the-mouse-that-roared-new-zealand-and-the-worlds-2-inflation-target.html "The mouse that roared: New Zealand and the world’s 2% inflation target").

[Fed chair Jerome Powell said on Wednesday that it was time to slow rate hikes](https://www.financedigest.com/oil-up-2-as-dollar-weakens-on-small-us-fed-rate-hike.html "Oil up 2% as dollar weakens on small US Fed rate hike"), noting that “slowing down at this point is a good way to balance the risks.

Over the past few days there was sufficient cause for pricing out [dollar strength because not just Powell’s](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate") overall dovish speech, but also yesterday’s US data hit the same deflation spot,” Commerzbank analysts said in a note.

[Investors are now turning their attention to nonfarm payrolls data on Friday for clues](https://www.financedigest.com/oil-steadies-after-dipping-on-china-outlook-investors-await-fed-clues.html "Oil steadies after dipping on China outlook; investors await Fed clues") on how rate hikes have affected the labour market.

[“Markets are really buying into the pivot story from the Fed,”](https://www.financedigest.com/markets-start-signalling-fed-may-be-going-too-far-amundi.html "Markets start signalling Fed may be going too far – Amundi") said ING FX strategist Francesco Pesole, who noted sentiment is bearish on the dollar.

Considering what’s come from the inflation side, we’ll need to [see strong](https://www.financedigest.com/italys-mps-sees-safe-habour-ahead-after-strong-quarter.html "Italy’s MPS sees ‘safe habour’ ahead after strong quarter") payrolls numbers for the dollar to rebound,” Pesole added.

The prospect of the Fed slowing its pace of monetary tightening has rejuvenated [investor sentiment](https://www.financedigest.com/6-months-to-go-until-brexit-and-investor-sentiment-remains-bold.html "6 months to go until Brexit and investor sentiment remains bold") and sent the dollar tumbling after four straight 75-basis-point (bps) hikes that fuelled much of the greenback’s ascent this year.

Futures traders are now pricing for the [Fed’s benchmark rate](https://www.financedigest.com/wage-data-dents-dollar-recovery-before-fed-rate-decision.html "Wage data dents dollar recovery before Fed rate decision") to peak just under 5% in May, as compared to a top of over 5% before Powell’s comments on Wednesday, according to data from Refinitiv.

Meanwhile, [China’s yuan rose 0.4% against the dollar](https://www.financedigest.com/dollar-slips-yuan-gains-on-china-pmi-hot-inflation-lifts-euro.html "Dollar slips, yuan gains on China PMI; hot inflation lifts euro") to 7.0294.

The yuan was [set for its biggest weekly gain](https://www.financedigest.com/londons-ftse-100-edges-higher-set-for-fourth-weekly-gain.html "London’s FTSE 100 edges higher, set for fourth weekly gain") since China revalued the currency in 2005, according to Refinitiv data, buoyed by expectations of an exit from China’s zero-COVID policy and a slower pace of interest rate hikes from the Fed.

The [dollar was 1% lower at 133.98 yen](https://www.financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbles.html "Yen sinks as rates outlook diverges; NZ dollar tumbles"), slipping to its lowest level since Aug. 16.

The [euro was little](https://www.financedigest.com/big-fall-in-euro-zone-inflation-offers-little-help-for-ecb.html "Big fall in euro zone inflation offers little help for ECB") changed at $1.0527, after gaining 1.1% on Thursday.

European [Central Bank](https://www.financedigest.com/dollar-skulks-at-eight-month-low-central-bank-meetings-in-focus.html "Dollar skulks at eight-month low, central bank meetings in focus") President Christine Lagarde warned on Friday that some European governments’ fiscal policies could lead to excess demand, and that fiscal and monetary policies need to work in synch for sustainable, balanced economic growth.

Sterling was last trading at $1.2260, down 0.1% on the day. The pound advanced 1.7% on Thursday and touched a 5-month high of $1.2311.

[(Reporting by Samuel Indyk in London](https://www.financedigest.com/london-reclaims-place-as-preeminent-global-financial-centre-for-the-first-time-since-2013-according-to-global-regulatory-outlook-report-from-duff-phelps.html "London reclaims place as preeminent global financial centre for the first time since 2013, according to Global Regulatory Outlook report from Duff & Phelps"), Ankur Banerjee in Singapore; Editing by Raju Gopalakrishnan, Kim Coghill and Simon Cameron-Moore)


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