Dollar slumps on worries of what clearing US data fog might show

SINGAPORE – The dollar struggled to claw back steep losses on Friday and was on track for a weekly fall, as investors awaited a backlog of US data following the government’s reopening, which they expect will likely point to a weakening economy.

The overnight move lower in the dollar came alongside a selloff in US equities and bonds eerily reminiscent of the market turmoil in April, as investors pared back bets of a Federal Reserve rate cut in December.

“There’s a whiff of ‘sell America’ back in the air,” said Ray Attrill, head of FX research at National Australia Bank.

However, expectations of a more hawkish Fed failed to lift the dollar, which fell to a two-week low against the euro overnight. The common currency bounced back above the USD 1.16 mark and last bought USD 1.1630.

The Swiss franc similarly held near an over three-week high and steadied at 0.7933 per dollar. Against a basket of currencies =USD, the greenback languished near a two-week low at 99.27.

The dollar index was headed for a weekly fall of 0.3%.

“Starting from next week, we’re going to get a lot of economic data from the US, and we think it’s going to be pretty bad. I think that the market is now preparing for the coming deluge of poor US economic data,” said Joseph Capurso, Commonwealth Bank of Australia’s head of foreign exchange, international and geoeconomics.

While that would normally fuel expectations of more aggressive Fed easing to shore up a weakening economy, Capurso said the impending patchy data releases may explain why Fed funds futures have moved the other way.

The White House indicated that the US unemployment rate for October may never be available, since it is dependent on a household survey that was not conducted during the shutdown.

“When you’re in the fog, you drive slower… when you don’t know what’s going on in the economy, maybe you slow down your cuts,” said Capurso.

While investors see less than a 50% chance of a 25-basis-point cut in December, the odds for such a move in January are almost fully priced. Rate expectations for 2026 have also hardly moved.

In other currencies, sterling fell 0.3% to USD 1.3152, failing to sustain its 0.45% overnight gain against a weaker dollar.

The move lower in the pound came after a report by the Financial Times that British Prime Minister Keir Starmer and Finance Minister Rachel Reeves have abandoned plans to raise income tax rates, marking a sharp shift just weeks ahead of the November 26 budget.

“A weakening of fiscal resolve on the back of political uncertainty is not good news for the GBP,” said Sim Moh Siong, a currency strategist at Bank of Singapore.

The battered yen found some reprieve on Friday thanks to the pullback in the dollar, though remained pinned near a nine-month low hit earlier this week. It last stood at 154.58 per dollar.

The Japanese currency was on track for a fall of nearly 0.8% for the week.

Down Under, the Australian dollar fell 0.02% to USD 0.6529, having slid overnight owing to the broad risk-off sentiment.

The New Zealand dollar last bought USD 0.5654, having similarly lost 0.25% in the previous session.

(Reporting by Rae Wee; Editing by Sam Holmes)