Investing.com - The dollar weakened against the other major currencies on Friday as tumbling oil prices and declines in China’s yuan dragged the wider markets lower, and dimmed expectations for rapid rate hikes by the Federal Reserve in the coming year.
The dollar fell against the euro, with EUR/USD rising 0.48% to 1.0992, to end the week with gains of 1.03%.
The dollar fell to five-week lows against the safe-haven yen, with USD/JPY dropping to 120.57, before pulling back to 120.99 in late trade. The pair ended the week down 1.81%.
The greenback was also lower against the Swiss franc and the pound, with USD/CHF at 0.9826 in late trade and GBP/USD at 1.5217.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, ended the day flat at 97.61, off early highs of 98.19. The index ended the week down 0.8%.
The drop in the dollar came as oil prices fell to the lowest levels since early 2009 amid expectations that a global supply glut will worsen next year. Falling oil prices have sparked renewed concerns over the health of the global economy and weighed on global inflation.
Investor nervousness was exacerbated as China’s yuan fell to the lowest levels in four-and-half years on Friday, pressured lower by worries over slowing growth in the world’s second-largest economy and expectations for higher U.S. interest rates.
Most investors expect the Fed to raise interest rates for the first time since June 2006 at its upcoming meeting on December 15-16.
Higher interest rates would make the dollar more attractive to yield-seeking investors.
The dollar had moved higher earlier in the day after data showing that U.S. retail sales rose 0.6% in November, following a 0.2% increase in October.
The solid data indicated that the economy is on a strong enough footing to support higher interest rates.
A separate report showed that the U.S. producer price index rose 0.3% in November, but was down 1.1% on a year-over-year basis, pointing to ongoing weakness in inflation pressures from the strong dollar and lower oil prices.
In the week ahead, investors will be focusing their attention on Wednesday’s outcome of the final Fed meeting of 2015. U.S. economic reports on inflation, manufacturing activity and industrial production will also be closely watched ahead of the rate announcement.
Wednesday’s survey data on euro zone private sector growth will be scrutinized by market watchers for signs of a recovery in the region.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, December 14
Japan is to publish its Tankan manufacturing and non-manufacturing index.
European Central Bank President Mario Draghi is to speak at an event in Italy.
Tuesday, December 15
The Reserve Bank of Australia is to publish the minutes of its latest monetary policy meeting, giving investors insight into how officials view the economy and their policy options.
Australia is also to release data on house price inflation.
Switzerland is to produce data on producer price inflation.
The U.K. is to report on consumer price inflation.
In the euro zone, the ZEW Institute is to report on German economic sentiment.
Canada is to publish data on manufacturing sales.
The U.S. is to release reports on inflation and manufacturing activity in the New York region.
Later in the day, Bank of Canada Governor Stephen Poloz is to speak at an event in Ottawa.
Wednesday, December 16
The euro zone is to release survey data on manufacturing and service sector activity. Germany and France are also to release individual reports.
The U.K. is to publish the monthly employment report.
The U.S. is to release data on building permits, housing starts and industrial production. Later Wednesday, the Federal Reserve is to announce its latest interest rate decision and hold a post-policy meeting press conference.
New Zealand is to publish data on third quarter growth.
Thursday, December 17
In the euro zone, the Ifo Institute is to report on German business climate.
The U.K. is to release data on retail sales.
The U.S. is to produce reports on manufacturing activity in Philadelphia and initial jobless claims.
Friday, December 18
New Zealand is to release data on business confidence.
The Bank of Japan is to publish the minutes of its latest monetary policy meeting, giving investors insight into how officials view the economy and their policy options.
Canada is to round up the week with data on consumer inflation and wholesale sales.