Dollar strengthens but is headed for biggest weekly loss since February 2022

Dollar strengthens but is headed for biggest weekly loss since February 2022

The dollar rose on Friday morning in Asia, its biggest weekly loss since early February 2022 as US Treasury yields fell and after the greenback rallied 10% in 14 weeks.

The Dollar Index that tracks the greenback against a basket of other currencies was up 0.35% to 102.94 by 11:45 PM ET (3:45 AM GMT). The index fell 1.5% for the week and headed for its first weekly loss after a six-week streak of gains, after climbing to a January 2003 high of 105.01 a week earlier.

USD/JPY inched 0.03% to 127.84.

AUD/USD fell 0.45% to 0.7015 and NZD/USD inched 0.11% to 0.6371.

USD/CNY edged up 0.22% to 0.67282 while GBP/USD inched 0.10% to 1.2447

However, global equities continued to fall as currencies tightened sharply, led by the US Federal Reserve, and China's COVID-19 developments continued to pose challenges to growth. economy. The dollar's appeal was also overshadowed by a drop in US yields as investors turned to buy Treasuries.

The 10-year Treasury yield fell overnight to a more than three-week low of 2.772%, from a three-and-a-half year high of more than 3.2% at the start of the month.

“The dollar is poised for a pullback,” said OANDA senior analyst Edward Moya.

The Japanese yen was set to gain for a second straight week, with the dollar falling 1.16% to 127.785 yen since the previous Friday.

There is growing concern that the Fed and other central banks are too late to contain inflation and will need to be more aggressive in tightening policy. The ongoing war in Ukraine is also further clouding the inflation outlook.

In Asia Pacific, the path out of China's COVID-19 lockdowns remains unclear, even as the city of Shanghai prepares to allow more businesses in COVID-free areas to operate. Normal operation will return from the beginning of June 2022.

Signs of a reopening in China gave some support to the Australian and New Zealand currencies. The Australian dollar fell on Friday, after gaining 1.33% on Thursday.

"China's strict lockdown measures are the main reason why the Australian dollar has deviated so much from its fundamentals," said Commonwealth Bank Of Australia analyst Carol Kong.

"We remain confident that the Australian dollar can rebound strongly once lockdown measures are eased as China pledges to ramp up infrastructure spending."

The Reserve Bank of New Zealand will also deliver its policy decision next Wednesday.

Westpac analysts have warned against being overconfident in the dollar's decline, even if its rally "lost some of its vitality".
"It's still too early to call a long-term top, given uncertain global market conditions and a firm Fed," Westpac said in a research note, recommending buying as the index drops to 102 and targeted 105 for weeks.

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