Dollar Surges as U.S. Economy Shows Strength

The U.S. dollar traded near a one-week high against major currencies, set to break a five-week losing streak due to strong economic data. The euro fell as inflation slowed in Germany and Spain, supporting ECB easing. The yen hovered near 145 per dollar amid rising U.S. Treasury yields.

The U.S. dollar traded near a one-week high against major currencies on Friday, poised to end a five-week losing streak, driven by robust economic data that quenched expectations for aggressive Federal Reserve interest rate cuts. The euro languished near a two-week low to the dollar as cooling inflation numbers in Germany and Spain bolstered the case for European Central Bank easing measures.

The yen remained close to the critical 145 per dollar level after weakening on Thursday, in response to a rise in U.S. Treasury yields. Official data on Friday revealed that core consumer prices in Tokyo rose by 2.4% in August, exceeding expectations and the Bank of Japan's 2% target, though a measure excluding energy costs showed only a 1.6% increase.

Overnight, U.S. data revealed that the gross domestic product (GDP) grew at an annualized rate of 3.0% in Q2, an upward revision from the previously reported 2.8%. This data invigorated the market, particularly affecting currencies and U.S. Treasury yields, according to Rodrigo Catril, senior FX strategist at National Australia Bank. Traders now assign a 34% probability to a quarter-point Fed rate reduction in September, down from 38% a day earlier.

(With inputs from agencies.)