On Friday, choppy trading brought the US dollar down to a low of three weeks, as investor worries about a recession outweighed inflation concerns for the time being, with economic data coming out mixed.

According to analysts, there was also a lot of position-squaring, since it was the end of the month.

Economic data

The US economic numbers had earlier shown that inflation in June had continued its aggressive rise, which kept the US Federal Reserve on the aggressive path of raising interest rates.

Last month, there was a 0.1% increase in the personal consumption expenditure (PCE) price index, which is its largest rise since September 2005.

There had also been a gain in May of 0.6%. There was a 6.8% increase in the PCE price index in the 12 months in June, which makes it its biggest increase after January 1982.

If the energy and food components are excluded, there was a 0.6% rise in the PCE price index, after it had gone up by 0.3% back in May.

The dollar impact

There had initially been a rise in the US dollar after the inflation numbers hit, but it trimmed gains after a report from the University of Michigan showed that there was a fall in consumers’ inflation expectations this month.

The Michigan survey had been mentioned by Jerome Powell, the chairman of the US Fed, in the previous month, as key to a change in their aggressive stance on monetary policy.

Data also showed that there was a decline in the Chicago manufacturing index, as it came down to a 23-month low of 52.1, while it had been 56.0 before.

This also weighed down the greenback. Afternoon trading saw the US dollar index, which measures the currency against six of its peers, decline by 0.3% to reach 105.89.

It had earlier declined to a low of three weeks at 105.53. Market analysts said that there was some position squaring at the end of the quarter too.

This is because people are now gearing up for a period in which growth and inflation rates fall, which will tilt the interest rate differentials against the greenback.

More data

The US jobs report is also scheduled for next week, which could be a volatility catalyst and people do not want to be caught off guard if the number of new jobs falls more than expected.

There was also a rise in another key indicator, which is the employment cost index (ECI). It is regarded as the broadest measure of labor costs and recorded a rise of 1.3% in the quarter.

According to the Labor Department, it recorded a rise of 1.4% in the first quarter of the year. The index is regarded as a core inflation predictor and a gauge of the slack in the labor market.

After the data, the rates futures market is pricing in a 72% possibility of a 50 basis points increase in the interest rate at the September policy meeting of the US Federal Reserve.