The greenback refreshed two-year highs around 100.75 on Thursday before retreating below the 100.50 zone as traders opted to take some profit after another spectacular rally witnessed in tandem with rising US Treasury yields to the highest levels in more than three years.
In the process, the euro breached the 1.0800 mark for the first time since April 2020 amid an overall dovish tone by the ECB that appears in contrast to the Fed’s aggressive tightening plan.
On Friday, the EUR/USD pair has settled in a relatively tight range, oscillating around 1.0800 following a slight bounce off 1.0757. The overall tome surrounding the common currency remains downbeat, and the pair could see fresh cyclical lows next week.
Meanwhile, the Japanese yen hit twenty-year lows, extending its unprecedented devaluation amid the Bank of Japan’s dovish policy. USD/JPY exceeded the 126.00 handle and extended the ascent to 126.67 on Friday.
The pair preserves a strong bullish bias despite the overbought conditions, implying that the buck could target the 127.00 figure next. The downside pressure surrounding the yen intensified after the Japanese Prime Minister said that the Bank of Japan's monetary policy aims to achieve its 2% inflation target, not at ‘manipulating currency rates.’
The American currency continues to cheer record US inflation that makes the Federal Reserve act even more aggressively despite the elevated geopolitical uncertainty. In the immediate term, as markets are quiet on Easter Friday, the safe-haven flows have eased somehow, thus preventing the dollar from targeting fresh long-term tops. Still, the greenback keeps consolidating this week’s gains.
Of note, should the USD index hold above 100.50 on a daily closing, it would be the highest weekly close in two years.
