Safe-haven Demand Limits Dollar's Tariff-led Losses Last Week

(RTTNews) - The U.S. Dollar extended losses during the week ended June 13 amidst persisting concerns about trade tariffs and the potential impact on the U.S. economy. An escalation in geopolitical tensions in the Middle East triggered by Israel's attacks on Iran however boosted safe-haven demand for the dollar that helped limit the greenback's cumulative losses.

The Dollar had declined at the onset of the new week amidst anxiety surrounding the trade talks between trading partners especially China. The U.S. Bureau of Labor Statistics on Wednesday revealed less-than-expected levels of consumer price inflation readings for the month of May that exacerbated the dollar's decline.

Headline inflation rose less than expected to 2.4 percent from 2.3 percent earlier. The core component thereof which was seen rising unexpectedly remained steady at 2.8 percent. Headline monthly inflation which was expected to remain steady unexpectedly declined to 0.1 percent from 0.2 percent earlier. The core component thereof which was expected to rise also unexpectedly declined to 0.1 percent from 0.2 percent in the previous month.

However safe-haven demand that followed Israel's attack on Iran towards the end of the week helped the dollar's rebound. In that backdrop, the U.S. Dollar inter alia slipped against the euro, the British pound as well as the Japanese yen but held firm against the Australian dollar. The greenback also declined against the Swiss franc, the Swedish krona and the Canadian Dollar during the week. The Dollar Index which measures the Dollar's strength against a basket of 6 currencies also dropped heavily.

From the level of 99.19 on June 6, the Dollar Index plunged 1.02 percent in a week's time. The Index which had touched a weekly high of 99.39 on Tuesday dropped to the weekly low of 97.60 by Thursday. The Index eventually edged up and closed the week at 98.18.

Amidst the dollar's weakness, the EUR/USD pair rallied 1.39 percent during the week ended June 13. From the weekly low of 1.1373 touched on Tuesday, the pair jumped to 1.1632 on Thursday. The pair eventually closed at 1.1553, versus 1.1395 a week earlier.

The British pound also gained against the greenback during the week ended June 13 amidst an increase in the unemployment rate that matched expectations and a decline in monthly GDP that exceeded expectations. The GBP/USD pair which had closed at 1.3525 on June 6 gained 0.30 percent during the week ended June 13 to close at 1.3566. The weekly trading range was wider, between a low of 1.3455 recorded on Tuesday and a high of 1.3634 recorded on Friday.

The Australian Dollar edged down 0.08 percent against the U.S. Dollar during the week ended June 13. From the level of 0.6493 recorded on June 6, the pair rose to close the week ended June 13 at 0.6488. During the week, the pair oscillated between a high of 0.6547 recorded on Wednesday and the low of 0.6456 recorded on Friday.

The U.S. Dollar weakened against the Japanese Yen during the week ended June 13. The USD/JPY pair closed the week at 144.10 versus 144.87 a week earlier, registering a decline of 0.53 percent. The pair ranged between the high of 145.48 recorded on Wednesday and the low of 142.80 recorded on Friday.

Amidst the Israel-Iran conflict and anxiety ahead of the Fed's interest rate decision due on Wednesday, the 6-currency Dollar Index has declined. It is currently at 97.98 versus 98.18 at close on Friday. Markets overwhelmingly expect the Fed to hold interest rate steady.

Amidst the Dollar's weakness, the EUR/USD pair has rallied to 1.1580 versus 1.1553 at close on Friday. The Bank of England's interest rate review is due on Thursday. Ahead of the same, the GBP/USD pair has rallied to 1.3585 versus 1.3566 at the end of the previous week.

The AUD/USD pair has also strengthened to 0.6515 versus 0.6488 at close on Friday. The USD/JPY pair has surged to 144.14 as the Japanese yen weakened ahead of the Bank of Japan's interest rate decision that would be known by Monday night.