The Dollar is Dropping for its Biggest Weekly Loss Since Mid-January; Bitcoin is Down
The US dollar fell from a two-and-a-half-month high against the Japanese yen on Friday, on track for its biggest weekly loss since mid-January against a basket of six major currencies, as traders stepped back to gauge the path of Federal Reserve policy.
According to analysts, the market has for the most part priced in the prospect of a higher terminal fed funds rate following the recent run of positive U.S. financial data.
The yen, which is sensitive to long-term rate differentials between the United States and Japan, appeared set to end its six-week losing streak against the greenback, as 10-year US yields fell from a nearly four-month high near 4.1%.
Cryptocurrencies, on the other hand, took a hit as the crisis surrounding Silvergate Financial institution worsened, with business heavyweights like Coinbase International and Galaxy Digital dropping the lender as a banking partner.
The dollar index, which measures the value of the dollar against six major currencies, fell 0.3% to 104.60, from a high of 105.36 at the start of the week, its highest level since Jan. 6.
This week, the index has fallen 0.5%, matching its largest percentage drop since the week of January 15. The dollar briefly recovered after data confirmed that the US services sector expanded at a moderate pace in February, with new orders and employment rising to more than one-year highs.
The Institute for Supply Management's (ISM) non-manufacturing index fell to 55.1 in February from 55.2 in January. "The greenback has primarily appreciated four weeks of positive aspects that completely erased the losses in January," said Juan Perez, director of purchasing and selling at Monex USA in Washington.
"As markets prepare to close out a difficult first quarter, optimism may rise as attention shifts away from the pains associated with inflationary pressures and towards the possibility of a prosperous second half of the year regardless of central financial institution tightening via interest rates."
" According to Reuters polled analysts, recent greenback strength is more likely to be temporary, and the foreign money will weaken over the year as the global economic system improves and the Fed stops hiking rates of interest effectively ahead of the European Central Financial institution.
However, the dollar appears unlikely to reverse its recent uptrend, according to Karl Schamotta, chief market strategist at Corpay in Toronto. "The following week's job opening and non-farm payrolls studies may generate a carry in yields and the greenback.
Merchants are more likely to trade cautiously, particularly in currencies exposed to more dovish domestic central bank messaging, such as the Australian dollar, Canadian dollar, and yen.
Meanwhile, the Bank of Japan (BOJ) is expected to begin dismantling extraordinary stimulus measures after Governor Haruhiko Kuroda retires next month. Tokyo inflation data for February exceeded the BOJ's target for the ninth month in a row, but the core measure slowed from a 42-year high.
The dollar fell 0.4% to 136.26 yen after climbing to 137.10 on Thursday, its highest level since December 20. The dollar fell 0.4% against the yen last week, its worst weekly performance since mid-January.
The euro gained 0.3% to $1.0628 after starting the week at a nearly two-month low of $1.0533. Sterling rose 0.7% against the dollar to $1.2032, on track for a 0.4% gain on the week, its best weekly performance since January.
The pound gained as Britain reached a post-Brexit Northern Ireland commerce agreement with the European Union, and a survey revealed that Britain's services sector grew at the fastest pace in eight months in February. Bitcoin fell 4.9% to $22,306, having hit a two-and-a-half-week low of $22,000. Ether fell 5.4% to $1,559 after reaching a low of $1,543.60 in mid-February.