On Friday, the U.S. Dollar fell to its lowest level in a year against a basket currency. The euro also reached a new high. Traders were predicting that the Federal Reserve would soon end their rate hike cycle due to signs of a cooling inflation.
The U.S. Labor Department released data on Thursday showing that the producer price index dropped by the largest amount in almost three years in the last month. This comes a day after consumer price data showed a moderated inflation rate.
The dollar fell further on Friday, and the U.S. Dollar Index, which measures it against six major currencies, hit a low of about one year, at 100.78.
The last time it was lower was at 100.82. It was heading for a steep weekly drop of more than 1 percent, the biggest since January.
The euro, meanwhile, rose to its highest level in a year, $1.1075. This was higher than the previous high of Thursday.
Ray Attrill is the head of FX Strategy at National Australia Bank. He said, "The euro has proven to be an easy way to express dollar negativity."
The Fed's (increased) confidence that inflation would allow them to cut rates by the end of this year is strengthened because of the significant surprise of a downward revision in the U.S. Price Index.
The British pound also reached a high of $1.2545, a 10 month high.
Money markets have priced in a 69% probability that the Fed will increase interest rates next month by 25 basis points. However, a series cuts is also being priced from July to the end the year. Rates are seen at just over 4.3% in December.
The unexpected rise in Chinese exports in March was a further sign that the global inflationary pressure has waned. In a Reuters survey, economists had predicted a 7.0% drop.
The positive Chinese data and a strong March employment report from Australia kept the Australian Dollar at $0.6788 in Friday's session, after it had risen 1.3% the previous day on the backs of data releases. Australian and New Zealand dollar are used as liquid substitutes for the Chinese yuan.
Attrill said, "It was like a positive storm in Australia." "Starting with employment numbers... and the China trading numbers, which looked exceptional good.
"You add to that the dollar weakness in the data from last night, and the positive risk sentiment and you have a (raft of) good news for Australia."
After a 1.3% jump on Thursday, the New Zealand dollar also gained 0.21% and is now at $0.6310.
Japan's yen is also used in other parts of Asia