Dollar slides, headed for first weekly loss in a month

The U.S. dollar looked listless on Friday, sliding against a handful of its major rivals but rallying against some emerging markets amid worries over further sanctions on Turkey.

The ICE U.S. Dollar Index DXY, -0.33% which measures the greenback against six developed market rivals, slipped 0.4% to 96.303. The gauge is on track for a 0.1% loss this week—its worst performance in four weeks, according to FactSet.

The buck weakened most notably against the Canadian dollar USDCAD, -0.5549% which rallied on the back of an inflation report. The data showed that Canada’s consumer prices rose 3% in the year leading up to July, beating consensus estimates of 2.5%. Inflation is one of the key data points used for central banks to determine their monetary policy path, and Friday’s data gave hope of a Bank of Canada hike. The U.S. dollar last bought $1.3078, down from $1.3157 late Thursday.

Japan’s yen USDJPY, -0.36%  was also stronger, with the buck slipping to ¥110.51, compared with ¥110.89 late Thursday in New York.

But the broader WSJ Dollar Index BUXX, -0.12% which incorporates some emerging markets besides the Group of 10 largest economies, fared slightly better but also fell 0.1% to 90.02.

EM had taken a breather amid the news that China and the U.S. would pick up their trade negotiations again, which benefited risk sentiment on Thursday. But all that was forgotten Friday, as Turkey’s lira faced some renewed weakness.

The lira USDTRY, +4.5308%  was under pressure after three days of respite and worries over further sanctions. On Thursday, Treasury Secretary Steven Mnuchin said Turkey could face additional U.S. sanctions over the detention of pastor Andrew Brunson, whose status has caused a diplomatic spat between the two.

Late Thursday, President Donald Trump tweeted that Turkey had taken advantage of the U.S. for too long.

The dollar moved back above 6 lira on Friday, last buying 6.1505, up 5.6%, while the euro hovered around 7 lira EURTRY, +4.8362% up more than 5.9%.

South Africa’s rand USDZAR, +0.3019% which faces risk from Turkey contagion, but also has a large current-account deficit, was another big underperformer Friday. The buck bought 14.8206 rand, up sharply from 14.7384 late Thursday.

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