The Dollar is Laid to Struggle its Loss in Five Weeks, While Crypto Drops
The US dollar fell from a two-and-a-half-month high versus the yen on Friday, heading for its first weekly loss since January against major peers as traders tried to predict the path of Federal Reserve policy.
The yen, on the other hand, which is particularly sensitive to US-Japanese long-term interest rate differentials, threatened to extend its recent losing streak to seven weeks, even as 10-year US yields fell from a nearly four-month high near 4.1% on Friday.
Cryptocurrencies suffered as the Silvergate crisis worsened, with industry heavyweights such as Coinbase Global and Galaxy Digital dropping the lender as a banking partner.
The dollar index, which compares the greenback to the yen, euro, and four other major currencies, fell 0.24% to 104.71, after reaching a high of 105.36 at the start of the week, its highest level since January 6. The index has fallen 0.5% since last Friday.
Comments from Fed policymakers, including Atlanta Fed President Raphael Bostic, took some steam out of the dollar and the breathless advance in US yields, saying that "slow and steady is going to be the appropriate course of action," despite new labor figures adding to the recent run of strong data.
"Yesterday's Fed speakers - Collins, Waller, and Bostic all seemed content with 25bp hikes for the time being," said Colin Asher, senior economist at Mizuho. "Most noted a potential need to push rates higher if data continued to come in hot - implying data dependence," Asher added.
According to Reuters polled analysts, recent dollar strength is temporary, and the currency will weaken over the year as the global economy improves and the Fed stops hiking interest rates well ahead of the European Central Bank. "A lot of the dollar strength seen in February has probably run its course now," said Michael Brown, TraderX's market analyst.
"I wouldn't be surprised to see some consolidation until (Fed Chair) Powell speaks next week and the jobs report on Friday," Brown added. Meanwhile, the Bank of Japan (BOJ) is expected to begin dismantling extraordinary stimulus measures after Governor Haruhiko Kuroda retires next month.
For the ninth month in a row, Tokyo inflation data exceeded the BOJ's target, but the core measure slowed from a 42-year high. The dollar fell 0.33% to 136.32 yen after rising to 137.10 overnight, its highest level since December 20. The dollar is just slightly above flat for the week, but any gain would extend its winning streak that began in mid-January.
After recovering from a nearly two-month low of $1.0533 at the start of the week, the euro gained 0.18% to $1.0616. It is up 0.7% since last Friday. Sterling gained 0.34% to $1.1988, putting it on track for a 0.4% weekly gain.
The Australian dollar rose 0.48% to $0.6762, putting it up 0.54% for the week. Bitcoin fell 4.5% to $22,403, having previously touched a two-and-a-half-week low of $22,000. Ether fell 4.7% to $1,570.30 after reaching $1,543.60 for the first time since mid-February.