Dollar up on euro as quarter ends, commodity led currencies sink By

By Sinéad Carew

NEW YORK (Reuters) – The dollar rose against the euro on Friday but pared gains late in a session that was muddied by quarter-end trading while riskier commodity-led currencies fell sharply after European inflation hit a record high and U.S. consumer spending increased faster than expected.

But while the was showing its biggest quarterly gain since the first quarter 2015 it was set for its first weekly decline in three weeks.

Sterling rose against the dollar after falling earlier in the day. The pound last showed four straight sessions of gains followed by wild declines on concerns about Britain’s plan to slash taxes and pay for it with more borrowing.

After hitting a record low on Monday, the British currency was on track for a weekly gain after the Bank of England bought British government bonds, known as gilts, on Wednesday, Thursday and Friday. [GBP/]

Data on Friday showed euro zone inflation zoomed past forecasts to hit 10.0% in September, reinforcing expectations for another jumbo European Central Bank rate hike next month.

The U.S. Commerce Department said the personal consumption expenditures price index (PCE), which the Federal Reserve targets at 2%, rose 6.2% year-on-year in August. This gave the Fed less reason to slow down its rate hiking cycle after raising U.S. borrowing costs faster in 2022 than any time since the 1980s.

“Today’s trading is distorted by quarter-end and month-end order flows,” as investors focused on rebalancing portfolios rather than on data said Paresh Upadhyaya, director of fixed income and currency strategy at Amundi U.S. in Boston.

But the strategist expects to see the dollar continue its upward direction as investors revert to trading on fundaments such afundamentalsamentals end.

“At this point you can’t fight the strong bullish dollar trend since its underpinned by counter cyclical factors such as concerns about global growth, geopolitical risk and rising U.S. interest rates,” Upadhyaya said.

Meanwhile, trading in currencies from countries that are heavily dependent on commodities reacted strongly to the hot inflation data on Friday due to concerns about demand and global economic growth, according to Upadhyaya.

The U.S. dollar was up 1.04% against the Canadian dollar while New Zealand’s was down 2.24% and the Australian dollar was down 1.62.

The pound, after touching $1.1235, was last up 0.28% on the day at $1.11500.

The euro was down 0.10% at $0.98055. The dollar index, which measures the greenback against a basket of major currencies, was down 0.08% on the day but on track for a quarterly gain of 7.2%.

But on a weekly basis the index was set for its first decline in three, last down 0.899%.

“The inflation data today surprised higher once again. That will keep upward pressure on interest rates and the dollar,” said…