Dollar rises but posts biggest monthly drop in a decade

By Caroline Valetkevitch

NEW YORK, July 31 (Reuters) - The dollar rose against a basket of currencies on Friday as investors covered shorts and took profits after the biggest monthly decline in the currency in a decade.

The dollar index =USDwas down 4.1% for July, its biggest monthly percentage fall since September 2010, with most of the drop coming in the last 10 days as new coronavirus cases surged across several U.S. states and some recent data pointed to an economic recovery losing steam.

On Friday, the dollar mostly held gains after data showed U.S. inflation-adjusted consumer spending has pulled out of April's deep hole but remains below its pre-pandemic level, and the currency strengthened as the session wore on.

After sliding as low as 92.539 earlier, the lowest since May 2018, the dollar index was last up 0.6% at 93.377.

"You had the dollar enter into a very serious decline over the month," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. "Interest rates are going down, and that makes the dollar much less attractive as a yield play, but (also) the market is starting to become aware of the political risk of the dollar."

"Today, we're just seeing a little bit of short covering, and a little bit of risk off always creates flows into the dollar."

On Thursday, confidence in the dollar was undermined after U.S. President Donald Trump raised the possibility of delaying the Nov. 3 presidential election.

The euro was at $1.1786 EUR=EBS, down 0.51% on the day.

The currency was little moved by data showing the euro zone economy recorded its deepest contraction on record in the second quarter while the bloc's inflation unexpectedly ticked up in July.

The euro traded below $1.10 as recently as May, but after European Union leaders agreed this month to a 750 billion euro economic recovery fund - while also taking on debt jointly in a major boost to regional cooperation - many investors have warmed to the currency again.

On a trade-weighted basis, the euro is at its highest since 2014 EUREER=ECBF.

The dollar's drop this month has created space for a rebound in currencies hit hard in March, when investors rushed for the safety of the greenback as panic over the coronavirus gripped markets.

Against the Japanese yen, the dollar earlier hit a 4-1/2-month low but last stood at 105.77 JPY=EBS, up 1%.

The British pound was at $1.3097 GBP=D3, up 0.03% on the day.

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Currency bid prices at 3:30PM (1930 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Euro/Dollar

EUR=

$1.1786

$1.1846

-0.51%

+5.14%

+1.1908

+1.1762

Dollar/Yen

JPY=

105.7700

104.7200

+1.00%

-2.84%

+106.0500

+104.1900

Euro/Yen

EURJPY=

124.69

124.06

+0.51%

+2.25%

+125.2000

+123.8500

Dollar/Swiss

CHF=

0.9142

0.9087

+0.61%

-5.54%

+0.9144

+0.9057

Sterling/Dollar

GBP=

1.3097

1.3093

+0.03%

-1.22%

+1.3169

+1.3081

Dollar/Canadian

CAD=

1.3385

1.3422

-0.28%

+3.06%

+1.3439

+1.3371

Australian/Dollar

AUD=

0.7142

0.7193

-0.71%

+1.71%

+0.7227

+0.7134

Euro/Swiss

EURCHF=

1.0776

1.0768

+0.07%

-0.72%

+1.0798

+1.0747

Euro/Sterling

EURGBP=

0.8998

0.9045

-0.52%

+6.43%

+0.9063

+0.8981

NZ Dollar/Dollar

NZD=

0.6629

0.6698

-1.03%

-1.59%

+0.6715

+0.6624

Dollar/Norway

NOK=

9.0927

9.0746

+0.20%

+3.58%

+9.1289

+9.0278

Euro/Norway

EURNOK=

10.7170

10.7520

-0.33%

+8.94%

+10.7825

+10.7103

Dollar/Sweden

SEK=

8.7723

8.6902

+0.40%

-6.15%

+8.7957

+8.6431

Euro/Sweden

EURSEK=

10.3415

10.2998

+0.40%

-1.22%

+10.3505

+10.2740

U.S. dollar indexhttps://tmsnrt.rs/2CVqUXv

(Reporting by Caroline Valetkevitch; Additional reporting by Thomas Wilkes in London and Hideyuki Sano in Tokyo; Editing by Jan Harvey, David Holmes, Jonathan Oatis and Richard Chang)

((caroline.valetkevitch@tr.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.