Dollar Edges Down Despite PCE Inflation Uptick

(RTTNews) - The Dollar Index edged lower during the week ended March 28, amidst turbulence related to trade tariffs and the release of hotter-than-expected PCE-based inflation readings. The mild decline in the Dollar Index came amidst the U.S. Dollar's losses against the euro, the British pound, Canadian Dollar, Swedish Krona and the Swiss Franc that more than offset the greenback's gains against the Japanese Yen. The euro has an almost 58 percent weight in the Index, followed by the yen with a weight of 14 percent, the pound sterling with a weight of 12 percent and the Canadian Dollar with a weight of 9 percent. The Swedish Krona and the Swiss Franc have weights of close to 4 percent each.

In the last week of the first quarter of 2025 spanning March 24-28, the six-currency Dollar Index edged down 0.05 percent. The Index closed at 104.04 on March 28, versus 104.09 a week earlier. The Index had climbed from the week's low of 103.84 on Monday to the week's high of 104.68 on Wednesday, amidst persisting trade tariff turbulence and key economic data releases from the U.S.

Currency markets remained volatile amidst trade tariff jitters. At the onset of the week, the dollar remained weak amidst expectations that the upcoming April 2 reciprocal tariffs could be less harsh than initially feared. However, the tariffs announced on automobile imports to the U.S. as well as President Donald Trump's warnings of deeper tariffs on Canada and the European Union altered market sentiment heavily.

Economic data released during the week from the U.S. showed an unexpected increase in durable goods orders, better-than-expected fourth quarter GDP update as well as hotter-than-expected PCE-based inflation readings.

The year-on-year PCE Price Index for February was steady as expected at 2.5 percent. The core component thereof which was expected at 2.7 percent, however, came in higher at 2.8 percent. The month-on-month PCE Price Index was steady at 0.3 percent, matching market expectations. The core component thereof recorded 0.4 percent whereas markets had expected it to be steady at 0.3 percent.

The EUR/USD pair added 0.12 percent during the week ended March 28 amidst concerns about the U.S. tariffs as well as lingering geopolitical tensions. Comments from ECB officials that reiterated the continuing fight against inflation also supported sentiment. From the level of 1.0814 recorded on March 21, the pair increased to 1.0827 by March 28. The week's trading range was between 1.0859 recorded on Monday and 1.0732 recorded on Thursday.

The GBP/USD also rallied 0.15 percent in the past week. The pair closed trading at 1.2938 on March 28, rising from the level of 1.2918 recorded a week earlier. The pair had touched the week's high of 1.2994 as well as the week's low of 1.2870, both on Thursday. Data released during the week had showed inflation declining to 2.8 percent in February from 3 percent in January, below market expectations of 2.9 percent.

The AUD/USD pair also increased 0.29 percent during the week ended March 28, closing at 0.6287 versus 0.6269 a week earlier. The week's trading range was between the low of 0.6263 recorded on Monday and the high of 0.6332 recorded on Wednesday. Optimism over China's stimulus pledges provided underlying support to the Australian dollar amidst the greenback's weakness.

Tariff related fears weighed heavily on the yen causing it to decline against the greenback during the week ended March 28. The USD/JPY pair closed the week at 149.81, versus the level of 149.31 recorded a week earlier, amidst a waning safe haven appeal for the yen. The pair climbed from the low of 149.36 recorded on Monday to a high of 151.22 on Friday.

On the horizon for currency markets are key economic data updates from the U.S. including Manufacturing PMI and Job Openings on Tuesday, Services PMI on Thursday and the monthly payrolls data on Friday. Ahead of these, the Dollar Index has declined to 104.01.

Amidst anxiety ahead of the interest rate decision by the Reserve Bank of Australia, the AUD/USD pair is currently trading at 0.6246. The USD/JPY has slipped to 149.42 amidst risk aversion. Ahead of the inflation update from the Euro Area, the EUR/USD pair is at 1.0818. The GBP/USD pair is at 1.2951.