Currencies: Dollar slips against G10 but rallies against emerging currencies

The U.S. dollar looked listless on Friday, sliding against a handful of its major rivals but rallying against emerging markets as investors assess the state of risk sentiment amid worries over further sanctions on Turkey.

It was a tale of two dollars on Friday, as the ICE U.S. Dollar Index DXY, -0.15%  , which measures the greenback against six developed market rivals, slipped 0.2% to 96.489. The gauge is on track for a modest 0.1% gain this week — its worst performance in four weeks, according to FactSet. The buck weakened most notably against the Japanese yen USDJPY, -0.44%  , slipping to buy ¥110.53, compared with ¥110.89 late Thursday in New York.

But the broader WSJ Dollar Index BUXX, +0.02%  , which incorporates some emerging markets besides the Group of 10 largest economies, fared better. It was last little changed in positive territory at 90.12, as the dollar strengthened across the board against emerging markets currencies.

EM had taken a breather amid the news that China and the U.S. would pick up their trade negotiations again, which benefited risk sentiment on Thursday. But all that was forgotten Friday, as Turkey’s lira faced some renewed weakness.

Read: 3 reasons the selloff in Turkey’s lira matters for markets all over the world

The lira USDTRY, +5.5523%  was under pressure after three days of respite and worries over further sanctions weighed on the batter currency. On Thursday, Treasury Secretary Steven Mnuchin said Turkey could face additional U.S. sanctions over the detention of pastor Andrew Brunson, whose status has caused a diplomatic spat between the two.

Late Thursday, President Donald Trump tweeted that Turkey had taken advantage of the U.S. for too long.

The dollar moved back above 6 lira on Friday, last buying 6.11114, up 4.9%, while the euro hovered around 7 lira EURTRY, +5.7355%  , up more than 5.5%.

South Africa’s rand USDZAR, +1.0815%  , which faces risk from Turkey contagion, but also has a large current account deficit, was another big underperformer Friday. The buck bought 14.8834 rand, up sharply from 14.7384 late Thursday.

Don’t miss: Turkey’s woes won’t trigger a full-blown crisis across emerging markets, economist says

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