LONDON, May 27 Reuters The dollar edged higher on Friday but was on track for its biggest weekly drop in nearly four months as traders lowered Federal Reserve rate hike expectations amid signs the U.S. central bank might slow or even pause its tightening cycle in the second half of the year.

A broadbased decline in U.S. Treasury yields, weak economic data and cautious comments by some Fed policymakers including Atlanta Fed President Raphael Bostic this week have raised the prospect that the dollar39;s gains premised on aggressive rate hikes may have halted for now.

The markets tentative speculation about a pause in the Feds tightening cycle in September is surely contributing to keeping the dollar soft, ING strategists said.

The dollar index , which measures the greenback against a basket of six other major currencies, fell as low as 101.43 for the first time since April 25. On a weekly basis, it was down 1.3, its biggest weekly drop since the first week of February.

It hit a nearly twodecade peak above 105 earlier this month but has retreated since then as economic data has weakened. A Citigroup economic surprise index for the United States has fallen to its lowest level since September 2021.

But some analysts were cautious about calling for a deeper drop in the dollar with global markets still on edge.

Monthend portfolio rebalancing is expected to give the dollar a boost so I would expect losses to ebb and suspense is high for ISM and payrolls next week after…