Dollar ends week stronger as U.S. data hurt risk

NEW YORK (Reuters) – The U.S. dollar rose across the board to hit a four-week high against a basket of currencies on Friday, as data showed a continued panicic COVID-19 tax on the economy raising demand for harbor-safe money.

U.S. retail sales fell for the third straight month in December amid job losses and renewed measures to reduce COVID-19 emissions, the Commerce Department reported on Friday, further evidence that the economy lost pace at the end of 2020.

The weak data pulled U.S. Treasury yields lower and U.S. stocks fell as investors turned more risk on Friday.

“I feel that, after all the vaccination hopes, we are now living in a slow (vaccine) spread, which is significantly reducing business activity,” said Juan Perez, senior money trader at Tempus Inc in Washington.

“Until we have more medical guarantees, markets will not thrive no matter what financial support may be in the way,” Perez said.

Democratic President Joe Biden on Thursday unveiled a nearly $ 2 trillion proposal to tackle the COVID-19 pandemic and its economic downturn that included $ 20 billion for vaccine circulation and $ 50 billion for testing. It builds on the $ 982 billion COVID-19 relief bill passed in December, more than tripling the funding allocated to state and local governments for vaccine circulation.

The U.S. Dollar Currency Index was 0.56% higher at 90.773, at a pace to end the week up 0.8%, its best weekly show in 11 weeks.

Graphic: Citigroup economic surprise index

Rising coronavirus infections were also reducing risk appetite, as daily issues in China are peaking in more than 10 months.

France will tighten its COVID-19 border controls and extend its curfew by two hours, while German Chancellor Angela Merkel said she wanted “very swift action” to combat the spread of virus variants after Germany had the highest number of deaths.

The dollar’s reversal from three-year levels, which began last week, may have a little more room if the state of the economy worsens, but the long-term outlook for the currency remained weak, analysts said.

Friday’s data also showed that U.S. producer prices rose moderately in December, suggesting that inflation expectations in the coming months may not be worrying.

“While short-term, the U.S. dollar could expand further, the background of the big picture of the dollar remains negative,” Derek Halpenny, MUFG’s money strategist, wrote in a note to messengers.

Despite the recent rise in the dollar, speculators increased their net short-dollar positions in the most recent week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released Friday.

The declining global risk position sent sterling 0.8% lower, although data showing Britain’s lockout in November did less damage to the economy than expected to keep the currency below ground.