# Dollar weakens after gains all week; debt deal hopes boost market sentiment Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-05-19 Category: TRADING Category URL: https://financedigest.com/category/trading Meta Title: Dollar Weakens as Debt Deal Hopes Boost Market Sentiment Meta Description: The dollar fell after a week of gains as optimism over a U.S. debt deal boosted risk sentiment. Euro, sterling, commodity currencies rallied against the URL: https://financedigest.com/dollar-weakens-after-gains-all-week-debt-deal-hopes-boost-market-sentimenthtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-05-19t113313z1lynxmpej4i0furtroptp4usa-markets-libor-sofr-1736813988371-compressed.jpg) # Dollar weakens after gains all week; debt deal hopes boost market sentiment By Amanda Cooper and Gertrude Chavez-Dreyfuss LONDON/NEW YORK (Reuters) – The dollar fell on Friday after posting gains for most of the week, as optimism over a breakthrough in U.S. debt ceiling talks boosted risk [sentiment and spurred buying of currencies that benefit from positive economic and market](https://www.financedigest.com/investing-age-infobesity-separating-sentiment-market-noise.html "Investing in an age of ‘infobesity’ – separating sentiment from market noise") conditions. The euro, sterling, and commodity currencies such as the Australian, New Zealand and Canadian dollars all rallied at the expense of the greenback. The dollar index eased 0.2% to 103.31, after hitting seven-week peaks the previous session. On the week, the [dollar posted a 0.6% gain](https://www.financedigest.com/dollar-gains-against-yen-as-fed-policy-debt-ceiling-in-focus.html "Dollar gains against yen as Fed policy, debt ceiling in focus"). Negotiators for Joe Biden’s Democrats told the president on Friday that they are making “steady [progress” in talks](https://www.financedigest.com/wall-street-gains-treasury-yields-rise-as-debt-ceiling-talks-progress.html "Wall Street gains, Treasury yields rise as debt ceiling talks progress") with Republicans aimed at avoiding a U.S. default, just [days after Biden and top](https://www.financedigest.com/setsquared-announces-exclusive-list-of-top-50-entrepreneurs-on-historic-day-for-uk.html "SETsquared announces exclusive list of top 50 entrepreneurs on historic day for UK") U.S. congressional Republican Kevin McCarthy underscored their determination to strike a deal to raise the government’s $31.4 trillion [debt ceiling](https://www.financedigest.com/stocks-reach-one-month-high-on-u-s-debt-ceiling-hopes.html "Stocks reach one-month high on U.S. debt ceiling hopes"). That eased fears of an unprecedented and [economically catastrophic](https://www.financedigest.com/billion-dollar-economic-cost-from-new-zealand-earthquake-as-insurance-claims-breach-15000-according-to-aon-catastrophe-report.html "Billion-dollar economic cost from New Zealand earthquake as insurance claims breach 15,000, according to Aon catastrophe report") default. There is a little bit of excitement over the debt ceiling, which is helping risk appetite,” said Brad Bechtel, [global head of FX at Jefferies](https://www.financedigest.com/global-blockchain-services-firm-wachsman-recruits-key-executives-from-jefferies-and-j-p-morgan-to-lead-new-strategy-division.html "Global Blockchain Services Firm WACHSMAN Recruits Key Executives from Jefferies and J.P. Morgan to Lead New Strategy Division") in New York. “It’s also a Friday and people cover ahead of the weekend. The dollar has had a nice rally all week.” At the same time, [data pointing to a still-tight labour market](https://www.financedigest.com/interoperability-of-data-to-accelerate-the-cardiac-pacemaker-market.html "Interoperability of data to accelerate the Cardiac Pacemaker Market"), with the number of Americans filing new claims for unemployment benefits falling more than expected last week, also raised expectations that the Federal Reserve could raise rates again next month to tame inflation. The [market has priced in a roughly 36% chance that the Fed raises](https://www.financedigest.com/vr-ar-startup-raises-seed-funding-from-mercia-to-revolutionise-market-research-industry.html "VR/AR startup raises seed funding from Mercia to revolutionise market research industry") the benchmark rate at its June meeting by 25 basis points, with the majority of traders still factoring in a pause. [Money markets](https://www.financedigest.com/xtrd-io-joins-the-fix-trading-community-to-help-bring-institutional-money-into-cryptocurrency-markets.html "XTRD.io Joins the FIX Trading Community to Help Bring Institutional Money Into Cryptocurrency Markets") also showed traders believe U.S. rates will fall to around 4.7% by year-end, compared with an expectation for a drop to 4.25% just two weeks ago – reflecting how the chances of a flurry of rate cuts have dropped. The message from the [Fed has been really hawkish](https://www.financedigest.com/marketmind-o-canada-markets-wary-of-fed-hawkish-surprise.html "Marketmind: O Canada! Markets wary of Fed hawkish surprise"). We know there has been this divergence between what the market’s [expecting and what the Fed has actually been saying and that was always going to need](https://www.financedigest.com/institutions-need-to-consider-spreadsheet-management-to-meet-the-pras-latest-stress-testingexpectations.html "Institutions Need to Consider Spreadsheet Management to Meet the PRA’s Latest Stress Testing Expectations") to be reconciled at some point. We’re starting to see this play out in the FX market now,” [City Index](https://www.financedigest.com/london-tops-colliers-cities-of-influence-index.html "London Tops Colliers Cities of Influence index") strategist Fiona Cincotta said. Two Fed policymakers said on Thursday U.S. inflation does not look like it is cooling fast enough to allow the [Fed to pause](https://www.financedigest.com/asia-shares-lifted-by-fed-pause-bets-china-real-estate-retreats.html "Asia shares lifted by Fed pause bets; China real estate retreats") its tightening campaign. Investors currently hold bearish bets, or short positions, against the dollar versus other G10 currencies worth [nearly $12 billion – the largest in almost two years](https://www.financedigest.com/nearly-60-of-people-are-worried-about-their-data-being-used-by-mobile-apps-but-continue-to-download-as-many-as-100-apps-over-the-course-of-a-year.html "Nearly 60% of people are worried about their data being used by mobile apps, but continue to download as many as 100 apps over the course of a year"). This would suggest there could be some incentive to unwind some of those bets, meaning the dollar has room to rally. In mid-morning trading, the [dollar](https://www.financedigest.com/dollar-drifts-as-traders-weigh-rate-path-yen-fragile.html "Dollar drifts as traders weigh rate path; yen fragile") slipped 0.1% against the yen to 138.55 yen, having risen to a six-month peak of 138.745 earlier. On the week, the [dollar gained](https://www.financedigest.com/dollar-gains-after-fitch-watch-heightens-debt-ceiling-jitters.html "Dollar gains after Fitch watch heightens debt ceiling jitters") 2.1%, on track for its largest weekly rise since mid-February. The euro rose 0.2% to $1.0791, just above its [lowest for seven weeks](https://www.financedigest.com/u-s-weekly-jobless-claims-fall-layoffs-lowest-in-more-than-21-years.html "U.S. weekly jobless claims fall; layoffs lowest in more than 21 years"), while sterling inched up 0.2% to $1.2434, not far off its lowest in a month. Among other major currencies, the Australian dollar took some heart from a pickup in commodity prices like copper and iron ore, rising 0.5% to $0.6653. In China, the yuan slid to its lowest since December to 7.0752 per U.S. dollar in the offshore market, as [data offered evidence of a sputtering recovery in the world’s](https://www.financedigest.com/opening-up-the-world-of-data.html "Opening up the world of data") second-largest economy. The dollar, however, was last down 0.2% at 7.0259. ======================================================== Currency bid prices at 10:00AM (1400 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index 103.3300 103.5000 -0.15% -0.155% +103.6200 +103.0700 Euro/Dollar $1.0793 $1.0771 +0.20% +0.73% +$1.0825 +$1.0760 Dollar/Yen 138.5600 138.7150 -0.11% +5.69% +138.7000 +137.9750 Euro/Yen 149.54 149.37 +0.11% +6.59% +149.7900 +148.7600 Dollar/Swiss 0.9018 0.9052 -0.38% -2.48% +0.9058 +0.9005 Sterling/Dollar $1.2433 $1.2409 +0.21% +2.82% +$1.2468 +$1.2393 Dollar/Canadian 1.3496 1.3502 -0.04% -0.39% +1.3512 +1.3469 Aussie/Dollar $0.6657 $0.6622 +0.55% -2.33% +$0.6671 +$0.6618 Euro/Swiss 0.9731 0.9747 -0.16% -1.66% +0.9751 +0.9729 Euro/Sterling 0.8678 0.8678 +0.00% -1.88% +0.8696 +0.8677 NZ $0.6276 $0.6225 +0.85% -1.13% +$0.6290 +$0.6224 Dollar/Dollar Dollar/Norway 10.8660 10.9200 -0.40% +10.82% +10.9380 +10.8190 Euro/Norway 11.7202 11.7474 -0.23% +11.74% +11.7781 +11.6800 Dollar/Sweden 10.5480 10.5512 +0.04% +1.35% +10.5822 +10.5059 Euro/Sweden 11.3808 11.3768 +0.04% +2.07% +11.3932 +11.3487 (Reporting by Amanda Cooper in [London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by Rae Wee in Singapore; Editing by Kim Coghill, Kirsten Donovan)](https://www.financedigest.com/crh-shareholders-back-primary-listing-switch-to-new-york-from-london.html "CRH shareholders back primary listing switch to New York from London") --- This blog is powered by Superblog. 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