Dollar slumps on poor US data; Aussie, Canadian drop on oil

John Phillips | Digital Editor | CNBC

The dollar tumbled to a near five-month low against the yen and a 2-1/2-week trough versus the euro on Friday, hammered by a combination of poor risk appetite arising from a renewed drop in oil prices and weak U.S. economic data.

The dollar index, which measures the greenback against a basket of six other major currencies, was down 0.39 percent at 98.71.

Commodity-based currencies such as the Australian, New Zealand and Canadian dollars also sank on the back of another slide in Chinese stock markets following an almost 5 percent tumble in oil prices to less than $30 per barrel.

"We had a tentative bounce in risk yesterday, but that was quickly reversed in Asia, and the soft U.S. data is really adding to the risk-off mood," said Vassili Serebriakov, currency strategist at BNP Paribas in New York.

Data showed on Friday that U.S. retail sales fell in December as unseasonably warm weather curbed purchases of winter apparel and cheaper gasoline weighed on receipts at service stations. U.S. producer prices were also lower last month due to weak energy costs, while the country's industrial output declined for a third straight month.

Following the poor U.S. economic data, the interest rate futures market has now priced in just one additional rate move by the Federal Reserve this year, compared with expectations of three hikes.

"The oil market is just a mess and it all seems to be stemming from that," said Tobias Davis, a currency hedging manager with Western Union in London.

The dollar fell to 116.60 yen, the lowest since Aug. 24. It was last at 116.98, down nearly 1.03 percent.

The euro rose to $1.0984, its highest since Dec. 29, and was last at $1.091, up 0.55 percent.

The Aussie dived to US$0.6865 versus the greenback, the lowest since April 2009, while the New Zealand dollar fell to a 3-1/2-month trough of US$0.6382.

The Canadian dollar, meanwhile, dropped to a fresh multi-year low against the U.S. dollar. The greenback was last up 2.3 percent at C$1.453.

Richard Benson, co-head of portfolio management at currency fund Millennium Global, said the Canadian dollar, down by a third in value against its U.S. counterpart since 2012, was suffering from bets on more easing of monetary policy next week.

"A lot of people are expecting the Bank of Canada to cut rates again next week," he said. "Its about 50-50 priced and the weakness of the currency might yet stop them. But dollar-Canada roofed it this morning."