Dollar Surges Amid Strong Economic Data, Yuan Reaches 14-Month High

The U.S. dollar maintains its strength near a one-week high, breaking a five-week losing streak due to strong economic data. Meanwhile, China's yuan hits its highest level since June 2023, and the euro remains mostly unchanged. Investors await key inflation data as the market adjusts expectations for Federal Reserve rate cuts.

The U.S. dollar held steady near a one-week high against major currencies on Friday, set to break a five-week losing streak. Robust economic data compelled investors to reassess expectations for aggressive Federal Reserve interest rate cuts. The Chinese yuan surged to its highest since June 2023, while the euro remained stable as inflation data confirmed easing price pressures in the euro zone.

Investors are keenly awaiting the release of the core personal consumption expenditures price index, the Fed's preferred inflation measure, at 1230 GMT (8:30 a.m. ET). The U.S. dollar index stood flat at 101.37, following a 0.36% rise on Thursday and touching a peak of 101.58 since Aug. 22. Overnight data revealed U.S. GDP grew at 3.0% annually in the second quarter, up from the initially reported 2.8%. "The standout is a stronger consumer sector," noted Rodrigo Catril, senior FX strategist at National Australia Bank.

The dollar is poised for a 0.6% weekly gain, its best since early April. Despite cooling inflation and a slower labor market in August, traders now put a 34% chance on a 50-basis point rate cut in September, down from 38% previously. Meanwhile, the yuan firmed to a 14-month high, buoyed by corporate demand, as expectations grow for U.S. rate cuts. The euro and sterling showed slight changes, reflecting mixed regional economic data.

(With inputs from agencies.)