Dollar limps to weakest week in two months, sterling still shaky

LONDON (Reuters) - The dollar was limping towards registering its weakest week in two months on Friday as softer-than-expected trade data from China added to signs that investors may be falling out of love with the post-U.S. election Trump trade.

A picture illustration of U.S. dollar, Swiss Franc, British pound and Euro bank notes, taken in Warsaw January 26, 2011. Picture taken January 26. REUTERS/Kacper Pempel

The dollar index, which measures the currency against six other major currencies, was down fractionally for a third straight day and 1 percent lower on the week as focus turned to U.S. retail sales due at 1330 GMT.

Against the yen the dollar stood at 114.7 yen, having given up the modest ground it made in Asia, while the euro clawed up to $1.0630 to bolster a fourth straight week of gains against the U.S. currency.

The greenback was still hobbled by disappointment that President-elect Donald Trump hadn’t touched on fiscal stimulus at a news conference on Wednesday and instead talked about divisive plans such as building a wall on the border with Mexico.

“Everybody is waiting for U.S. retail sales now but it has been an interesting week,” Credit Agricole CIB FX Strategist Manuel Oliveri said.

“It more or less shows that we need a little bit more detail from Donald Trump when he comes in on his economic agenda.”

More Federal Reserve members talked on Thursday about rate hikes and trimming the size of the central bank’s balance sheet, while U.S. retail sales data could give a jolt later if they come in far off forecast.

A Reuters poll shows that economists expect a 0.7 percent pickup in retail sales in December, following 0.1 percent growth in November.

“Medium term we should still see a stronger dollar,” said James Binny, head of currency with State Street Global Advisors in London. “The positions were just so one-way and we needed a bit of a clearout to make some further progress.”

The week’s other main G10 loser, sterling, remained shaky on Friday as it was confirmed that Prime Minister Theresa May would give a speech on Tuesday on Britain’s plan to leave the European Union.

One-week implied sterling volatility - options contracts which allow traders to bet or hedge against near-term swings in the currency, spiked to their highest since October at 14.775.

It was also set to be the pound’s worst week against the euro since the start of October. It ticked down to 87.36 pence per euro on Friday but was down almost 2 percent from where it had started the week.

Against the dollar it was a touch higher on the day, though, at $1.2184 having briefly popped above $1.22 earlier. But it was firmly on course for its fifth weekly drop in the last six, having hit a three-month low of $1.2038 on Wednesday.

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Reporting by Marc Jones; Editing by Andrew Heavens and Hugh Lawson