Dollar rides ‘Trump trade’ toward third weekly rise

SINGAPORE – The dollar headed for a third weekly gain in a row on Friday, helped by a dovish European Central Bank and strong US data that is pushing out expectations for how fast US rates can fall, particularly if Donald Trump wins the presidency.

The euro is down almost 1% for the week so far, has fallen through its 200-day moving average, and at USD 1.0828 in early Asia trade is parked near a 2-1/2 month low.

On a rolling basis, the dollar’s 3.1% three-week gain on the euro is the sharpest rally since the middle of 2022, and it has forged to the strong side of 150 yen for the first time since early August. It last bought 150.24 yen.

On Thursday, data showed US retail sales growth was higher than expected and the ECB cut interest rates by 25 basis points.

Four sources close to the matter told Reuters the ECB was likely to cut again in December unless economic data suggests otherwise.

Meanwhile, markets have been disappointed at the lack of detail offered by Chinese authorities on plans to revive the slowing economy, and the yuan is headed for its largest weekly fall in more than 13 months.

“All of that has played in to a stronger dollar,” said Jason Wong, senior strategist at BNZ in Wellington.

“There’s also been a Trump trade going on in the background,” he said, with the dollar tracking Trump’s newfound lead in election prediction markets, since his tariff and tax policies are seen as likely to keep US interest rates high.

Trump’s prospects have also set bitcoin rallying since his administration is seen as taking a softer line on cryptocurrency regulation. It was last at USD 67,335, up 13% since Oct. 10. The US goes to the polls on Nov. 5.

Later on Friday, Chinese growth and activity data is due and is likely to show a slowdown that puts this year’s economic growth target of around 5% at risk.

The Australian dollar, sensitive to China’s outlook owing to commodity exports, steadied at USD 0.6697 on Friday for a fall of around 0.8% on the week.

It had received a boost on Thursday when stronger-than-expected jobs data reduced bets on interest rates cuts. The New Zealand dollar is also down 0.8% on the week and was a fraction lower at USD 0.6055 early in the Asia session.

Israel said it had killed Hamas leader Yahya Sinwar in Gaza, a mastermind of the Oct. 7, 2023, attack that triggered war.

Israel’s shekel rose and touched a two-week high after the news, though Israeli Prime Minister Benjamin Netanyahu said fighting would go on and broader markets had little immediate reaction.

Sterling regained the USD 1.30 level overnight but is also headed for a weekly loss after a bigger-than-expected drop in British inflation raised bets the Bank of England might cut interest rates twice before the end of the year.

British retail sales and US housing starts data are due later on Friday, as are plans from Japan’s largest union group, Rengo, for the year’s wage negotiations. Data showed Japan’s core consumer prices were up 2.4% year-on-year in September, a bit higher than expected.

The US dollar index hit a 2-1/2 month high on Thursday at 103.76 and is up 0.8% this week.

China’s yuan hovered at 7.1370 in offshore trade, ahead of the onshore open.

(Reporting by Tom Westbrook; Editing by Jamie Freed)