Dollar falls as ECB rate hike expectations mount

The dollar weathered fresh losses Friday, despite a stronger-than-expected snapshot on consumer spending, amid expectations that euro zone interest rates will be hiked next week.

The gap in US and euro zone rates, US rates are considerably lower, has already weighed on the dollar, which has also been weakened by lackluster economic growth in the United States.
Traders generally prefer to hold currencies in countries where rates are higher so they can reap higher yields on their investments.

The euro was changing hands at 1.5790 dollars around 2100 GMT, up from 1.5756 late Thursday.

The dollar also fell against the Japanese yen, to 106.11 from 106.73 Thursday.

The US currency came under renewed pressure this week after the Federal Reserve brought its rate-cutting campaign to a halt Wednesday as it opted to keep its key base rate pegged at 2.0 percent in the face of mounting inflation pressures.

The dollar lost ground Friday despite a government report showing that consumer spending rose 0.8 percent in May, as Americans spent the proceeds of one-off tax rebate checks.

The financial markets follow the monthly snapshot closely because consumer spending is the main driver of US economic activity, which has been sapped, by a lengthy housing downturn and a related credit squeeze.