At 1047 GMT, the dollar index was down 0.6% to 102.98, but posted a 4.8% gain in April.
Weaker-than-expected US growth data on Thursday barely dampened the dollar’s rise, with investors still expecting a 50 basis point rate hike at next week’s Federal Reserve meeting.
The question for investors is whether or not the dollar’s rally will continue in May, said Jeremy Stretch, head of G10 currency strategy at CIBC.
“We already have a huge degree of tightening under consideration in the dollar price curve; I’m not sure we’ll be able to achieve that scale or scope of Fed tightening,” he said.
This means there is not necessarily a case for increasing dollar holdings, which are already “pretty overblown,” he said.
But ING FX analysts said in a note to clients that while the dollar is “overbought,” “there will be plenty of investors ready to buy on dollar dips and looking to position themselves for a dollar rally in the summer when the Fed hit the brakes on monetary policy.
With the greenback falling, other currencies received a boost, with the euro rising 0.6% to $1.05655. Still, the euro was headed for a monthly decline of 4.5%, its biggest decline since 2015.
The euro has lost about 6.6% against the dollar since Russia’s invasion of Ukraine on February 24, with investors concerned about Europe’s energy security, inflation and growth.
Eurozone inflation rose to 7.5% in April.
The yen was hovering above the psychological level of 130 per dollar at 130.085, having crossed 130 for the first time in 20 years on Thursday, when the Bank of Japan promised to maintain its ultra-easy policy.
For its part, the pound sterling rose to 1.2572 dollars as the greenback weakened, but was still on track for its biggest monthly decline since 2016.
Source: Ambito
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