Dollar slides for second week as traders adjust Fed rate hike views

Dollar slides for second week as traders adjust Fed rate hike views

"We continue to think that the best of the broader USD rally is behind us now and while the USD may not fall significantly yet, further gains seem unlikely," strategists from Scotiabank said in a client note.

The "Fed is fully priced and expectations for rate hikes later in the year may be subject to revision if the economy slows more quickly than expected," they said.

The greenback hit a nearly two-decade peak above 105 earlier this month but has declined along with outlooks for the magnitude of likely Fed rate hikes this year, which have been fueled in part by fears over runaway inflation.

"The dollar is losing altitude as the view of the Fed pausing rate hikes in the fall gains traction," said Joe Manimbo, senior market analyst at Western Union Business Solutions.

Minutes from the Fed's May meeting this week showed most participants believed 50 basis-point hikes would be appropriate at the June and July policy meetings, but many thought big, early hikes would allow room to pause later in the year to assess whether tighter policy is helping to tame inflation.

Although inflation continued to increase in April, it rose less than in recent months, data showed on Friday. The personal