Dollar fell, tracking slumps in U.S. Treasury yields

The U.S. dollar declined for a second straight session on Friday, tracking slumps in U.S. Treasury yields. The drop came as investors booked profits after recent sharp gains; however, the drop was viewed as temporary.

Meanwhile, U.S. 10-year Treasury yields were last at 1.484%, down around six basis points.

For the week, the U.S. dollar index recorded its biggest rise since late August, as investors looked to the Fed’s reduction of asset purchases in November and a possible rate hike late next year.

Cautious market sentiment amid COVID-19 worries, wobbles in China’s growth, and a Washington gridlock ahead of a looming deadline to raise the U.S. government’s borrowing limit has supported the greenback.

The U.S. dollar index dipped 0.3% to settle at 94.046, increasing 0.8% this week, the largest weekly boost since August. Meanwhile, Friday’s batch of U.S. data was mixed, adding to dollar weakness ahead of the weekend.

U.S. consumer spending rose more than anticipated in August, registering a 0.8% increase. However, consumption was weaker than initially thought in July, falling 0.1% instead of increasing 0.3%.

Core inflation as measured by the PCE price index, surged 0.3% in August

Core inflation as measured by the personal consumption expenditures price index, surged 0.3% in August

It’s essential to mention that inflation remained elevated. Core inflation as measured by the personal consumption expenditures price index, excluding the volatile food and energy components, surged 0.3% in August, unchanged from the previous month.

The euro gained 0.1% to settle at $1.1595, declining about 1.1% for the week, biggest percentage drop since June.