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The dollar stabilized on Friday after several daily declines, but saw its worst week in eight months as traders curbed their bets on higher interest rates from the Federal Reserve.
An index that tracks the currency against a basket of six peers has fallen 2.2 percent over the past five sessions, its worst performance since a 4.1 percent drop in a week in November.
The dollar index rose 0.2 percent on Friday, ending a week in which economic data showed more signs of slowing inflation, with producer and consumer prices falling more than expected in June.
“Dollar long positions are evaporating quickly, with (product price) numbers all confirming the narrative of lower inflation in the US,” said Francesco Pessol, currency analyst at ING.
Mark Hefell, chief investment officer at UBS Global Wealth Management, said the June inflation figures “reinforced our view that the recent weakness in the dollar will continue.” Hefell added that the British pound, the yen and the Swiss franc would all benefit, as would gold, which tends to rise as the dollar falls.
Wall Street stocks reversed earlier gains as investors combed through the recent quarterly results of some of the nation’s largest banks.
Wall Street’s benchmark S&P 500 fell 0.1 percent on Friday, but added 2.4 percent for the week. The heavy Nasdaq Composite Index lost 0.2 percent on Friday, but its gains of 3.3 percent over the past five sessions marked its biggest weekly jump since the end of March.
Shares in JPMorgan rose 0.6 percent after it reported a 67 percent jump in net income year-on-year to $14.47 billion, far above analysts’ estimates of $11.9 billion.
Wells Fargo, which fell 0.3 percent, said its net income rose 57 percent from a year ago, to nearly $5 billion. Citigroup’s profit fell by more than a third in the second quarter, sending its shares down 4 percent, while the State Street index fell 12.1 percent on higher costs. BlackRock Asset Management’s net income rose 27 percent, but its shares fell 1.6 percent.
The banks’ second-quarter results come at a time of intense scrutiny of lenders’ balance sheets following the collapse of several regional banks in the spring. Banks are also under pressure to raise interest rates on consumer deposits since they have begun charging more fees for loans as the Federal Reserve has raised borrowing costs.
Keith Buchanan, senior portfolio manager at Global Investments, said the strong results in banks’ lending divisions indicated strength in the US economy despite higher interest rates.
“The consumer (lending) segment in general has seen very healthy activity,” as well as loans to small businesses and mid-market companies. “This is what drives the American economy,” he said.
“I think (the Federal Reserve) created a Goldilocks environment for economic growth and to stop inflation.”
However, the rally in US stocks this week in the face of higher interest rates has fueled fears of a sell-off if the economy sinks into recession.
“We’re on the cusp of a pullback but there’s a bullish fever so we may not see it for a while,” said Mike Zygmunt, head of trade and research at Harvest Volatility Management. “It’s going to take some really great news or data to keep that bullish momentum going. I personally don’t think earnings season can deliver that.”
European stocks fell, with the region-wide Stoxx 600 closing down 0.1 percent, ending a streak of five consecutive positive sessions, the best consecutive streak since mid-April. The French CAC 40 index added 0.1 percent, the German DAX index fell 0.2 percent, and the FTSE 100 index in London lost 0.1 percent.
Asian markets were mixed. South Korea’s Kospi advanced 1.4 percent, Hong Kong’s Hang Seng rose 0.3 percent, and China’s CSI 300 was unchanged. Japan’s Topix fell 0.2 percent.