Calming bond markets weigh on the dollar

On Friday, the dollar dropped to a one-week low. Calming bond markets elevated investor sentiment and appetite for Asian currencies pulled the benchmark down. 

The safe-haven dollar languished near a one-week low on Friday as calming bond markets lifted investor sentiment and appetite for Asian currencies.

The dollar index fell around 0.6% this week after rebounding from more than a three-month high of 92.506.

This week, a benign consumer price index reading helped ease fears that increased fiscal stimulus and sustained ultra-easy monetary policy could drive the US recovery to overheat.

In the United States, three-and 10-year Treasury yields sales this week helped ease concerns about investors’ ability to absorb an increase in bonds needed to finance the response to the pandemic debt. 

Euro has lost 2% so far this year

According to Mazen Issa, senior foreign-exchange strategist at TD Securities, this week has been loaded with good news from Treasury auctions to the ECB being a bit more dovish and trying to increase its bond purchases.

Investors had been concerned that the auctions would have a poor response after a weak sale of seven-year debt last week that helped start a dramatic sell-off in the government bond market.

Stock markets rose, with the S&P 500 and Dow Jones indices hitting all-time highs on Thursday. A string of positive news helped it as weekly jobless claims fell more than expected, and US President Joe Biden enacted its $1.9 trillion stimulus package.

Risk appetite was underpinned by consumer price data on Wednesday that helped ease concerns about a possible spike in inflation as economies reopen after the COVID-19 pandemic.

The euro gained 0.44% to $1.19815. The European currency has lost around 2% so far this year. The euro also traded close to a one-week high of $1.1990.

On Thursday, the European Central Bank said it was ready to accelerate money-printing to keep eurozone yields down.

The ECB said it is ready to speed up the money printing to limit the cost of borrowing from the eurozone, telling skeptical markets that it is determined to lay the foundation for a robust economic recovery.

The commodity-linked Australian and New Zealand dollars reached one-week highs on inflation fears. The AUD traded at $0.77865, while NZD stood at $0.7223. The dollar strengthened at around 108.60 yen, another safe-haven currency.

Bitcoin last traded at $57,185.71, with an increase of more than 12% for the week. On Thursday, BTC reached $58,000 for the first time since it set a record high at $58,354.14 on February 21.