Dollar Heads for Worst Week in Over a Month as Warsh Stays Quiet

The dollar is about to break a four-week winning streak after remarks from Federal Reserve Chairman Kevin Warsh failed to give it a lift.

The Bloomberg Dollar Spot Index fell as much as 0.4% on Friday, heading for its worst week since Sept. 4. The greenback weakened against most of its major peers, with the euro advancing, poised to snap a five-week run of losses.

Investors pared bets on an interest-rate hike later this month after Warsh did not comment on monetary policy or the US economy at the International Monetary Fund’s annual meetings Friday morning in Bangkok. It was the last chance for Warsh to hint at his policy view before the Fed enters a so-called blackout period Saturday prior to its October policy meeting.

“Warsh offered no guidance, which while it should be expected of him at this point, the market is taking it as a signal that the October Fed meeting is likely a no go,” said Noah Buffam, strategist at CIBC Capital Markets.

Earlier this week, the dollar got a boost from hotter-than-expected US consumer inflation data that fueled bets that the Fed would hike rates. Warsh had sent a hawkish message to markets prior to the Fed’s move in September to raise rates for the first time in three years.

The Fed’s shifting signals are creating uncertainty over the path of rates, according to Brent Donnelly, president of Spectra Markets.

Now, “they are wheeling out doves like mad, and October is priced out despite rip-roaring monthly data this week,” wrote Donnelly in a note, referring to reports showing persistent inflation and retail sales beating forecasts. Traders’ expectations for a rate hike at this month’s policy meeting have fallen to 20% from 30%.

The dollar is also facing pressure from “building risks around the AI trade which has supported US growth in recent years,” said Buffam.