(Bloomberg) — A gauge of the dollar snapped a six-day rally as traders weighed the potential for the Federal Reserve to raise interest rates after data showed policy makers’ preferred measure of inflation slowed last month.
The U.S. currency also slid against most major peers after a report showed personal spending barely increased in February and the prior month’s advance was revised down as Americans saved more of their incomes.
Traders will watch a speech by Fed Chair Janet Yellen Tuesday for clues about the central bank’s rate path, followed by monthly labor data later in the week. The dollar’s resilience may depend on how the economy weathers turbulence from overseas. The currency has slumped more than 4 percent since the end of January on speculation U.S. policy makers will refrain from tightening rates amid a darkening outlook for global growth.
“The dollar is really not your best bet right now,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in an interview on Bloomberg Television. “Every time you have the dollar rising, concerns about China devaluation, concerns about emerging-market growth, concerns about commodity markets — those start to resurface and that’s what we think is going to stop the Fed from hiking.”
The dollar fell 0.4 percent to $1.1210 per euro as of 10:34 a.m. in New York and rose 0.2 percent to 113.27 yen. The Bloomberg Dollar Spot Index slid 0.3 percent.
Financial markets including those of the U.K, Germany, Australia, and New Zealand were shut Monday for the Easter holiday. Trading will take place as normal in the U.S.
The personal spending report also showed the price index tied to consumer purchases rose 1 percent in February from the same period in 2015, down from a 1.2 percent pace in January. This gauge is preferred by Fed policy makers and hasn’t met their 2 percent goal since April 2012.
U.S. employers probably added 208,000 workers in March, after hiring 242,000 the previous month, according to a Bloomberg survey before the Labor Department releases the figure April 1.
Speculators and hedge funds trimmed net bets for a third week that the U.S. currency will strengthen against eight major peers, according to data from the Commodity Futures Trading Commission.
“The dollar is going to face some headwinds,” Ian Gordon, a foreign-exchange strategist at Bank of America Corp. in New York, said on Bloomberg Television.
Fed Bank of San Francisco President John Williams, who doesn’t vote on monetary policy this year, said Monday that the global economy (particularly China and Brazil) was having a significant impact on measures that U.S. policymakers watch to determine interest rates.
Traders put the chances of the Fed raising rates at its June meeting at 36 percent, down from 42 percent a week ago, according to data compiled by Bloomberg. The calculation assumes the effective fed funds rate will average 0.625 percent after the central bank’s next increase.