Best Exchange Rates

Dollar Doldrums: USD Suffers Worst Day in 10-Months Despite Pick-Up in Core Inflation

Categories: BRL, CAD, EUR, GBP, JPY, KRW, Markets, MXN, MYR, News, SGD, THB, USD

The U.S. Dollar Index (DXY) suffered its worst one-day decline in ten months on Friday in spite of an unexpected acceleration in the rate of core inflation and what appeared to be an upward revision to U.S. interest rate expectations.

After the Bureau of Labor Statistics announced that U.S. consumer prices, excluding food and energy, climbed 0.3 percent in December, the yield on two-year Treasury notes touched 2 percent for the first time since the height of 2008’s financial crisis, appearing to solidify market expectations for a number of rate hikes by the Federal Reserve in 2018.

Ordinarily, such news would have been dollar-supportive, but not this time. The Dollar Index fell through 91 for the first time in three years, settling at 90.9, and in doing so, locked in a fourth consecutive weekly loss.

At present, investors are taking every opportunity to sell the dollar, says senior currency strategist at Daily FX, Ilya Spivak, favouring instead to “chase opportunities to get in early [on other currencies] as other top central banks begin to dial back accommodation.”

Indeed, it’s been a rocky start to 2018 for the dollar. The Dollar Index’s 1.5 percent decline in the first two weeks of the year adds to a 9.7 percent decline for 2017, which itself was the index’s worst annual performance since 2003.

“The rush to capture would-be policy pivots from the BOJ and the ECB was clearly on display this week,” Spivak said in reference to the euro’s surge to a three-year high above $1.22 and the yen’s sharp appreciation to rates below ¥111 per dollar.

Dollar traders have now switched focus from “Trumpflation” – which prompted dollar euphoria in the aftermath of 2016’s U.S. presidential election and, to a lesser extent, fuelled September and October’s rally – to global reflation.

With the Fed now more than two-years into its policy tightening cycle, it stands to reason that interest rates in the rest-of-the-world’s advanced economies have more upside in the coming years than those in the U.S. – reason enough to buy everything non-dollar, or so it seems.

The dollar wasn’t helped on Friday by positive news from Europe.

News that Angela Merkel’s Christian Democratic Union party, together with its sister party, the Christian Social Union, had achieved a breakthrough in coalition talks with the Social Democrats made investors feel better about wading into euros. The euro gained nearly 1.5 percent against the dollar on the day, to $1.2203.

Likewise, sterling bulls were given the freedom to add to long positions after news broke that the Netherlands and Spain had agreed to seek a Brexit deal that would keep Britain as close to the EU as possible. A 1.5 percent gain took the pound to $1.3727 – a nineteen-month high.

The dollar also suffered against the Brazilian real, Mexican peso, Canadian dollar, Malaysian ringgit and Norwegian krone, among others, in response to an unrelenting rally in the price of oil. NYMEX WTI crude oil futures rose for a fifth consecutive week to a three-year high of $64.4 per barrel.

Of the aforementioned “petro-currencies,” the Norwegian krone did best of all. With oil and gas products making up nearly half of Norway’s total exports, the krone is highly sensitive to gyrations in these commodities’ prices. A 1.3 percent appreciation to Kr.7.908 per dollar marked the krone’s strongest level in thirteen weeks and the currency’s best one-day gain since May.

In the Asia-Pacific region, currencies weakened against the politically-driven strength of the euro and British pound but of course continued their march against the dollar.

The remarkable Malaysian ringgit gained for an eleventh consecutive week against the greenback and signalled its comfort at stronger levels by closing at rates below RM 4 per dollar for the second consecutive week – now 3.97.

Other regulars on BestExchangeRates – the Thai baht, Singapore dollar, South Korean won and Chinese yuan – all moved to new long-term highs.


Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product. Full Disclaimer

BER Newsletter

Subscribe for the latest exchange rates, currency news and special offers directly to your inbox.

Best Exchange Rates - We make it Easy to Compare Exchange Rates & Fees of Banks and Currency Exchange & Payment Providers

Level 2, AMP Tower, 50 Bridge Street, Sydney, NSW 2000, Australia

Disclaimer | Copyright | Privacy Statement


Best Exchange Rates is an information only service. By browsing on the website, using our comparison tools or FX provider referral service, you are asking Best Exchange Rates to provide you with information about currency exchange products & services from multiple financial institutions.

We will try to show you a range of products & services in response to your request for information. The search results do not include all providers and may not compare all features relevant to you. In giving you product information we are not making any suggestion or recommendation to you about a particular product.

If you decide to conduct foreign exchange you will deal directly with a financial institution, and not with Best Exchange Rates. Rates and product information should be confirmed with the relevant financial institution, see our terms of use for further details.

Best Exchange Rates may receive fees or other benefits in relation to activity on the Best Exchange Rates website. Best Exchange Rates may receive remuneration for vendor referral links. Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.

Read our Full Terms of Service


This website and its contents are the copyright of BEST EXCHANGE RATES PTY LTD © 2009-17. All rights reserved.

Any redistribution or reproduction of part or all of the contents in any form is prohibited other than the following. You may print or download contents to a local hard disk for your personal and non-commercial use only. You may copy some extracts only to individual third parties for their personal use, but only if you acknowledge the website as the source of the material.

You may not, except with our express written permission, distribute or commercially exploit the content. You may not transmit it or store it on any other website or other form of electronic retrieval system.

For more details or request distribution right please contacxt us here.