Dollar edges down as month-end flows weigh
U.S. consumer spending increased more than expected in September, keeping it on a higher growth path heading into the fourth quarter, while monthly inflation was elevated, data on Friday showed.
The dollar index, which measures the currency's strength against a basket of six rivals, was 0.1% lower at 106.47, with analysts attributing some of the weakness to month-end flows where investors buy and sell currencies to rebalance their portfolios toward the end of the month.
The index was up 0.3% for the week.
«This time of the month there are month end flows that tend to predominate at certain points,» Bipan Rai, North America head of FX strategy at CIBC Capital Markets, said.
«I would expect some of that is reflected in the price action that we are seeing for the dollar today,» he said.
Rai noted that following big gains for the July-September period the dollar has struggled to make further advances despite relatively upbeat U.S. economic data.
«We have seen some signals, at least in the near term, that the dollar is a bit overbought,» said Rai, who still expects the dollar to remain strong, aided by the U.S.
economic growth picture.
Traders appeared hesitant on Friday to place big directional bets in FX markets ahead of the Federal Reserve and Bank Of Japan policy meeting next week.
«Additional positioning doesn't really make sense until those two key risk events are out of the way,» Rai said.
Cooling inflation will likely keep the Fed on pause in coming months, traders bet on Friday, even as persistent underlying price pressures amid strong consumer spending kept some chance of a rate hike later this year in play.
The U.S. economy grew at its fastest pace in nearly two years in the third quarter, data on
