US dollar bolstered by month-end buying

The US Dollar (USD) gained on Thursday, boosted by month-end buying, despite data showing signs of a slowing US economy that suggested the Federal Reserve may be done raising interest rates and start easing by the middle of next year.

The dollar index, which measures the greenback’s value against six major currencies, rose 0.5% to 103.38. The index was on track to post its best daily gain in more than a month.

Analysts said the dollar benefited from month-end demand as investors squared up positions for November, a period that featured a sharp sell-off in the U.S. currency with the market pricing in rate cuts next year.

The dollar’s gains persisted despite reports that showed U.S. inflation continued to moderate in October and jobless claims rose in the latest week suggesting a slowing labor market.

Inflation as measured by the personal consumption expenditures (PCE) price index was unchanged in October after climbing 0.4% in September. In the 12 months through October, the PCE price index increased 3.0%. That was the smallest year-on-year gain since March 2021 and followed a 3.4% advance in September.

“If you are hoping (Fed Chair) Jay Powell continues to be hawkish in the coming months, the PCE services index is not your friend,” said Jamie Cox, managing partner, at Harris Financial Group in Richmond, Virginia.

“There is significant deceleration in inflation afoot. These data solidly mark the end of the rate cycle.”

Meanwhile, initial claims for state unemployment benefits increased 7,000 to a seasonally-adjusted 218,000 for the week ended Nov. 25. Economists had forecast 226,000 claims for the latest week.

Currency bid prices at 9:28AM (1428 GMT)