The U.S. dollar remained within a narrow range on Monday, influenced by lower Treasury yields, as traders anticipated crucial economic data for insights into the potential timing of Federal Reserve interest rate adjustments.
Bitcoin experienced a surge to a more than two-year peak, driven by significant inflows into cryptocurrency exchange-traded funds.
Following a 0.33% gain on Friday, the euro maintained strength, with a looming European Central Bank policy decision scheduled for Thursday.
The yen exhibited fluctuations around the closely monitored 150 per dollar level, as investors attempted to gauge the potential exit of the Bank of Japan from its negative interest rate policy, possibly as early as this month.
The dollar index, measuring the currency against six major peers, including the euro and yen, showed minimal change at 103.85 as of 0530 GMT. It oscillated narrowly within the 103.43-104.97 range of the past month, losing 0.26% on Friday following weak manufacturing and construction spending data.
This decline in the index also contributed to the easing of Treasury yields, further reducing support for the dollar. The benchmark 10-year yield slid to 4.178%, the lowest in two weeks, before stabilizing around 4.2% on Monday.
Westpac strategists noted a potential shift towards a test of range support leading up to key macro releases and Fed Chair Jerome Powell’s congressional testimony. However, they emphasized that a significant data shift would be necessary to alter the current buying opportunity pattern keeping the dollar index within its established range.
The week ahead brings crucial manufacturing and services ISM readings on Tuesday, with Friday’s focus on monthly payroll figures.
The dollar gained 0.1% against the yen, reaching 150.28, as traders assessed BOJ Governor Kazuo Ueda’s cautious comments. The market is deliberating whether the BOJ will conclude its negative interest policy during its March 18-19 meeting or postpone until April or later, awaiting the results of spring salary negotiations.
The euro remained relatively stable at $1.08435, positioned near the top of its recent range. Economists expect the ECB to potentially cut rates at its June meeting, with hopes for additional insights during Christine Lagarde’s press conference.
Sterling experienced a slight increase of 0.08% to $1.2663.
Bitcoin continued its upward trajectory, trading approximately 1.2% higher from Sunday at $63,350, reaching $64,284.75 at its peak. The cryptocurrency has witnessed a 50% increase this year, with a significant surge in trading volume for U.S.-listed bitcoin funds following their approval earlier in the year.
Matt Simpson, Senior Market Analyst at City Index, cautioned against a bullish approach at current highs, noting a potentially fatigued market in the Bitcoin futures chart. While not suggesting short positions, he advised caution when considering long positions at these levels.
