SINGAPORE – The US dollar tumbled to a one-year low against a basket of currencies on Friday, while the euro hit a one-year peak, as traders ramped up expectations of an imminent end to the Federal Reserve’s rate hike cycle on signs of cooling inflation.

Data from the United States on Thursday showed that the producer price index (PPI) fell by the most in nearly three years in March, coming a day after inflation data pointed to moderation in consumer prices.

The US dollar index, which measures the currency against six major peers, tumbled to a roughly one-year low of 100.78.

It was last 0.15 per cent lower at 100.82, and was headed for a weekly decline of more than 1 per cent, its steepest since January.

Meanwhile, the euro rose to a fresh one-year top of US$1.1075, pushing past Thursday’s previous high.

“The significant downside surprise in US PPI has made people a bit more convinced of the view that the Fed will (soon) be done... and (strengthened) conviction that inflation will allow the Fed to be cutting rates before the end of the year,” said Mr Ray Attrill, head of foreign exchange strategy at National Australia Bank.

The Singapore dollar dropped as much as 0.5 per cent soon after the nation’s central bank announced a pause in its monetary tightening, but pared its fall as the US currency slid to trade 0.1 per cent lower at 1.3239 per US dollar at 12.01pm.

Money markets are pricing in a 69 per cent chance that the Fed will raise interest rates by 25 basis points in May, although a series of cuts is also being priced in from July till the end of the year, with rates seen just above 4.3 per cent in December.

Adding to signs that global inflationary pressure is waning was an unexpected surge in Chinese exports, which in March shot up 14.8 per cent from the same month a year earlier, stunning economists who predicted a 7 per cent fall in a Reuters poll.

The upbeat Chinese data, alongside a robust March employment report in Australia, kept the Australian dollar supported at around 67.88 US cents on Friday, having surged 1.3 per cent in the previous session on the back of the data releases.

The Australian and New Zealand dollars are often used as liquid proxies for China’s renminbi.

The New Zealand dollar similarly gained 0.21 per cent to 63.1 US cents, after jumping 1.3 per cent on Thursday.

Elsewhere in Asia, Japan’s yen rose more than 0.1 per cent to 132.39 per dollar, while the offshore renminbi gained 0.3 per cent to 6.8495 per dollar. REUTERS