Dollar Softens as Market Awaits Fed Clues; Bitcoin Surges to Two-Year High

The U.S. dollar weakened on Monday, driven by lower Treasury yields, as traders awaited more crucial economic data for insights into the timing of Federal Reserve interest rate adjustments. “Bitcoin rose to a more than two-year peak amid significant flows into cryptocurrency exchange-traded funds,” reported sources.

The euro remained strong after Friday’s 0.33% increase, with an impending European Central Bank (ECB) policy decision on Thursday. The yen hovered near the closely monitored 150 per dollar threshold, as investors sought to evaluate the potential timing of the Bank of Japan’s departure from its negative interest rate policy, possibly as soon as this month.

The dollar index, which gauges the currency against six major counterparts including the euro and yen, edged down 0.04% to 103.82, nearing the lower end of the 103.43-104.97 range observed over the past month.

Bitcoin
Bitcoin surged to a two-year peak amid significant flows into cryptocurrency exchange-traded funds. (Credits: Andre Francois McKenzie)

Following weak manufacturing and construction spending data, the index declined by 0.26% on Friday, consequently pulling down Treasury yields. This development removed additional support for the dollar, with the benchmark 10-year yield dropping to 4.178%, marking its lowest level in two weeks.

According to Westpac strategists, “Bias appears to be swinging towards a test of range support,” ahead of significant macroeconomic releases this week and Fed Chair Jerome Powell’s annual testimony to Congress. They added, “However, markets will need a major shift in data to suggest that range support will be anything other than another buying opportunity,” indicating the likelihood of the dollar index remaining within its existing range.

This week’s agenda includes manufacturing and services ISM readings on Tuesday, with the highlight on Friday being the release of monthly payroll figures.

Euro stayed firm ahead of ECB decision
Euro stayed firm ahead of ECB decision; yen near 150 per dollar level, BOJ policy eyed. (Credits: Unsplash)

The dollar gained 0.2% against the yen, reaching 150.43 yen, as traders analyzed cautious remarks from BOJ Governor Kazuo Ueda, who stated late last week that it was premature to conclude that the central bank’s inflation target was close to being met. This contrasted with hawkish comments from BOJ board member Hajime Takata earlier the same day, which propelled the yen to a more than two-week high of 149.21 per dollar.

Market participants are deliberating whether the BOJ will terminate its negative interest policy at its March 18-19 meeting or opt to wait until April or later. Elsewhere, the euro remained relatively unchanged at $1.08425, positioned near the upper end of its recent range.

While most economists anticipate the ECB will initiate rate cuts at its June meeting, they are eager for additional insights on the timing from ECB head Christine Lagarde’s upcoming press conference.

Bitcoin was trading approximately 1.5% higher from Sunday at $63,500, having earlier surged to $64,284.75, marking its strongest level since November 2021, the same month it reached its record high of $68,999.99.

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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