The Dollar is Heading For a Second Weekly Gain, Thanks to Expectations That The Fed Will Cut Its Asset Purchases

The US dollar rose on Friday, August 13th, and is on track for a second consecutive week of gains against its major rivals, as investors assess the possibility of the Federal Reserve announcing its plans to cut stimulus in the coming weeks.

Data on Thursday showed that US producer prices posted their biggest annual increase in more than a decade in the 12 months to July.

While the data comes a day after consumer price figures that indicated that inflation may have peaked, analysts say that producer price data contributes to strengthening the rationale for lifting some of the stimulus provided by the Federal Reserve.

Against a basket of competing currencies, the dollar consolidated as high as 93, near the April peak of 93.195 recorded last week.

The index is up 0.2% this week after increasing 0.8% last week.

The Fed will announce a plan to reduce its asset purchases in September, according to a large majority of economists polled by Reuters.

The dollar’s rally was supported by a moderate outburst of risk aversion in the currency markets, while the Australian dollar and the Chinese yen struggled against the US currency.

The Australian dollar scored $0.7340, near the eight-month low of $0.72895 it touched last month, while the Canadian dollar fell to 1.2517 Canadian dollars for its American counterpart.

The euro settled at 1.1734 dollars, and is on track to incur losses for the second week in a row, and is slightly away from the four-month low of 1.1706, which was recorded on Wednesday.