Dollar loses traction as markets remain choppy

The US Dollar Index retreats early Friday after closing the previous two days in positive territory as markets remain choppy while assessing the latest geopolitical developments. The Ifo institute will release the business sentiment data for Germany later in the session and the US economic docket will feature February Pending Home Sales and the University of Michigan’s final Consumer Sentiment Index for March. Several FOMC policymakers, including New York Fed President John Williams and Fed Governor Christopher Waller, will be delivering speeches ahead of the weekend as well.

US President Joe Biden said late Thursday that he thinks Russia should be removed from the G20. Biden further noted that they were coordinating with the G7 and the European Union on food and energy security. Risk flows continued to dominate the financial markets and the S&P 500 rose more than 1%. Heading into the European session, US stock index futures are up 0.2%.

Meanwhile, the benchmark 10-year US Treasury bond yield is edging lower after gaining more than 3% on Thursday. Chicago Fed President Charles Evans said that a 50 basis points rate hike could help them move rates close to neutral. Moreover, Minneapolis Fed President Neil Kashkari noted that he pencilled in seven rate hikes for 2022.

EUR/USD closed virtually unchanged on Thursday and was last seen clinging to small daily gains above 1.1000, supported by the modest selling pressure surrounding the greenback.

GBP/USD started to edge higher during the Asian trading hours on Friday and seems to have steadied above 1.3200. The data published by the UK’s Office for National Statistics showed on Friday that Retail Sales contracted by 0.3% on a monthly basis in February, compared to the market expectation for an increase of 0.6%.

Fueled by the rising US T-bond yields, USD/JPY extended its impressive rally and climbed to its strongest level since December 2015 at 122.42 late Thursday. The pair is trading in negative territory below 122.00 early Friday. Commenting on the heightened volatility, “I don’t think weak yen reflects eroding market trust in the value of the yen,” Bank of Japan Governor Haruhiko Kuroda said. “Market’s view is that the weak yen is due to Japan importers’ dollar demand, prospects of US interest rate hikes.”

Gold ignored rising yields on Thursday and rose to its highest level in 10 days above $1,960 on Thursday. XAU/USD is consolidating its recovery gains early Friday and stays afloat above $1,950.

Bitcoin continues to push higher toward $45,000 after closing the last three days in positive territory and gaining nearly 7% in that period. Mirroring the upbeat mood surrounding cryptocurrencies, Ethereum is trading at its highest level in more than a month near $3,100.

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