May 27, 2022 02:16AM ET
By: AnalysisWatch
The U.S. dollar fell on Friday to the lowest in a month against its main rivals as traders lowered their expectations for an interest rate hike by the Federal Reserve following signs that the central bank could slow or even suspend its interest tightening cycle in the second half of the year.
The dollar index, which measures the greenback against a basket of six currencies, fell to 101.43 for the first time since April 25. The rally in Asian equities also reduced demand for the dollar.
Against the euro, the U.S. currency fell to its lowest level since April 25 at $1.0765 and against sterling to its lowest level since April 26 at $1.2666.
The risk-sensitive Australian dollar rose 0.6% to $0.7142, while the New Zealand dollar climbed 0.65% to $0.6520.
The dollar index is expected to fall 1.49% this week after last week's 1.37% drop. This would be the first two-week decline since the beginning of the year.
The index hit a near two-decade high above 105 mid-month, but retreated amid signs that the Fed's tightening policy may already be slowing economic growth. Treasury yields also fell from multi-year highs, further weakening the dollar.
The dollar weakened 0.25% to 126.74 yen, gradually falling over the past three weeks from a two-decade high of 131.35.
The minutes of the Fed's May meeting, released Wednesday, showed that most participants thought 50 basis point hikes would be appropriate at the June and July meetings, but many felt that large, front-loaded hikes would leave room for a pause later in the year to assess the effects of policy tightening.
However, improving risk sentiment didn't help bitcoin, which slid 1.62% to around $28,710, continuing this week's gradual decline from the psychological level of $30,000.