U.S. Dollar Recovered From a Near One-Week Low

Hopefully, the U.S. dollar recovered from a near one-week low on Friday thanks to bond yields. However, this is not the end of the story as it looked set for its first weekly fall in three against a basket of its main rivals as riskier currencies gained support from calmer market sentiment.

It is worth noting that the dollar index against six major currencies rose 0.22% to 91.58 after reaching 91.364 overnight for the first time since March 4. As a reminder, it dropped around 0.6%  this week. It retreated from a more-than-three-month high reached on Thursday.

Interestingly, the euro traded at about $1.1965, holding firm after the European Central Bank’s announcement. The central bank decided to accelerate its emergency bond purchases over the next quarter.

People should keep in mind that the dollar index gained more than 1.6% in 2021, as it tracked benchmark 10-year Treasury yields from below 1% to as high as 1.625% at the end of the week. On March 12, the yield stood at around 1.55%.

Importantly, the focus next week will be on the U.S. Federal Reserve’s policy meeting. As a reminder, Chair Jerome Powell refrained from raising concerns about higher bond yields earlier this month. It is not surprising that a lot of people are closely monitoring the situation, as they would like to learn more about the policies.

The Federal Reserve has the ability to make important decisions. Investors, analysts are constantly monitoring its activities. The pandemic is not over yet and in this situation, any decision has the potential to influence market sentiment.

Dollar and other important currencies

Let’s have a look at other currencies as well. Interestingly, the safe-harbor Swiss franc eased to 0.9267 against the dollar after falling to over a seven-month low earlier this week. It is worth mentioning that the yen fell 0.2% to 108.71.

People should keep in mind that the Bank of Japan may tweak a three-tier system at next week’s policy review to exclude a larger portion of reserves from negative interest rates.

The commodity-linked Australian and New Zealand dollars fell from near one-week highs. However, they were on track to post their first weekly gains in three as improving economic data lifted metals prices. Interestingly, the Australian dollar traded at $0.77780 after hitting its highest since March 4 overnight. Moreover, New Zealand’s kiwi changed hands at $0.7215, having climbed to a near one-week high of $0.7240 overnight.

Last but not least, the oil-linked Canadian dollar was slightly lower at C$1.25 after resign for three straight sessions.