The Bloomberg Dollar Index edged lower on Friday as softer-than-expected US core CPI for March eased pressure on the Federal Reserve to tighten monetary policy. The index fell 1.4% this week, marking its largest weekly drop in more than two months.
The Bloomberg Spot Dollar Index declined by 0.1%, marking its fifth consecutive daily loss and posting its worst performance since January 23.
Valentin Marinov, Head of G-10 FX Research and Strategy at Credit Agricole, stated that the US dollar has been at a full disadvantage in terms of nominal interest rates since the outbreak of the Iran war, and today’s CPI data may exacerbate this trend.
However, he also pointed out that ‘the current movement in the foreign exchange market largely depends on the upcoming US-Iran negotiations scheduled for this weekend.’
Lee Hardman, FX strategist at Mitsubishi UFJ Financial Group, wrote in a report that ongoing attacks in the Middle East highlight ‘significant obstacles remain on the path to a long-term peace agreement, and it remains unclear when energy supplies through the Strait of Hormuz can be restored.’
He added, ‘This persistent uncertainty may dampen further short-term gains in high-beta currencies.’
USD/JPY rose 0.2% to 159.27, marking its second consecutive day of gains.
Japanese Finance Minister Satsuki Katayama stated that authorities are prepared to take action across all aspects of the market, considering the impact of exchange rate fluctuations on households and the economy.
Ryozo Himino, Deputy Governor of the Bank of Japan, noted that authorities are closely monitoring risks of economic slowdown and inflation amid concerns over prolonged escalation in the Middle East.
USD/CAD edged higher to 1.3841, registering its first increase this week.
Canada’s net change in employment last month was slightly below expectations, with the unemployment rate remaining stable.
The euro/dollar rose 0.2% to 1.1723, marking its fifth consecutive session of gains.
The pound/dollar advanced for a fifth consecutive session to 1.3462; both the euro and pound have now moved above their respective 200-day moving averages.
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