The U.S. dollar built on losses Friday against major rivals after a host of mixed economic data, but remains on track for the biggest weekly gain since June on revived expectations for another rate increase by the Federal Reserve this year.
Data showed August retail sales dipped 0.2%, compared with expectations for a flat reading. Excluding car sales, the data showed a 0.2% increase, versus expectations for a rise of 0.4%. The New York Federal Reserveâ€™s Empire State manufacturing survey, which tracks activity in New York state, retreated slightly to 24.4 for September, holding near a three-year high.
August industrial production fell 0.9% versus flat expectations, and capacity utilization for the month dipped to 76.1%, versus a forecast at 76.8%. Business inventories rose 0.2% in July, and September consumer sentiment measured 95.3, beating the median forecast of 94.5, concluding Fridayâ€™s data dump.
While retail sales disappointed, the Empire state manufacturing survey exceeded estimates, likely thanks to the weaker buck, wrote Lennon Sweeting, head of corporate trading and chief market strategist at XE.com, in a research note.
The drop in industrial production can be attributed to effect of Hurricane Harvey, according to Capital Economicâ€™s chief U.S. economist Paul Ashworth. â€œSeptember could be even worse when Irma is factored,â€ he added.
That said, consumer confidence seems to have shaken off Augustâ€™s negative headlines surrounding Charlottesville, Va., when President Donald Trumpâ€™s response to a white-supremacist rally in the town drew intense rebuke inside and outside Washington, leading the market to scale back expectations that he could get pro-business policies enacted. Tensions around North Korea, although persisting, have mostly run in the background as have the aftermath of a pair of deadly hurricanes.
The ICE U.S. Dollar index DXY, -0.23% which shows the dollar against a basket of six major currencies, traded at 91.880, 0.3% lower, compared with Thursday. For the week, the ICE dollar gauge is on pace for its biggest weekly climb since the period ended June 9 with a rise of around 0.6%, according to FactSet data. Part of the upward momentum for the buck may be attributed to the market pricing in a better than 50% chance of a rate increase by the Fed before year-end, up from 30% last week. Higher rates can make the dollar a more attractive option to park funds for currency traders.
Meanwhile the WSJ Dollar BUXX, -0.13% â€”a broader measure of the buckâ€”slipped 0.1% to 85.09, registering a 0.7% gain on the week.
North Korea fired another missile over Japan early Friday Tokyo time. The missile flew across the Japanese island of Hokkaido before landing in the Pacific. The missile firing follows a thermonuclear bomb test about two weeks ago and a separate missile test across Japanese airspace in late August.
The U.S. and Japan requested an emergency meeting of the U.N. Security Council on Friday.
Still, the missile launch failed to spook investors to the same degree tensions did back in August, market participants said.
Against the Japanese yen USDJPY, +0.54% Â the dollar rose to Â¥110.87, compared with Â¥110.23 late on Thursday in New York. On the week, the dollar jumped 2.9% against the yen.
The yen also slipped 0.9% against the South Korean won JPYKRW, -0.6356% with one yen buying 10.1955 won.
Elsewhere, the British pound GBPUSD, +1.4480% Â extended its strengthening trend and broke above the $1.36-mark early during Fridayâ€™s session, before retreating somewhat to $1.3571, versus $1.3398 late Thursday, after presumed Bank of England dove Gertjan Willem Vlieghe said U.K. rates will have to rise soon. The pound also shrugged off an explosion on the London underground on Friday that injured 22 people, which is being treated as a terrorist incident.
Sterling began its surge higher on Thursday after the BOE left its benchmark interest rates unchanged but said rates could rise faster than expected, surprising the market. Week-on-week, the U.K. currency rose 2.8% against the buck.
â€œThe break above $1.35 indicates that cable may be in a new bullish uptrend, with flows driven by interest rate expectations rather than concerns about Brexit,â€ said Boris Schlossberg, managing director of FX strategy at BK Asset Management wrote in a note on Friday. Cable is another name for the pound-dollar pair.
â€œThe sharp spike in the exchange rates should be deflationary in and of itself and could go a long way in helping the BoE curb inflation without necessarily hiking rates more than once.â€
The euro EURUSD, +0.2265% Â rose to $1.1941 on Friday morning in New York, up from $1.1920 late Thursday. The eurozone currency is on track for a 0.8% drop for the week.
The greenback slipped against the Swiss franc USDCHF, -0.3737% with one dollar buying 0.9592 francs versus 0.9633 late Thursday. Still, the dollar was up 1.6% against the franc on the week.