The dollar was set to record its best week against the yen in three months on Friday, bolstered by Federal Reserve Chair Jerome Powell’s and other Fed officials’ remarks which put a lid on market expectations of a peak in U.S. interest rates.
Cryptocurrencies, meanwhile, maintained their multi-month highs with renewed speculation over the potential approval of an exchange-traded bitcoin fund.
The dollar rose to a one-year high at 151.38 yen after Powell’s remarks were taken as hawkish by markets. The greenback also touched one-week highs against the Australian and New Zealand dollars.
“Powell’s speech was quite hawkish, and that just really hit sentiment,” said Tina Teng, market analyst at CMC Markets.
This came a week after the Fed left interest rates steady, causing the dollar and Treasury yields to tumble. However, the dollar regained its footing this week and was eyeing a weekly gain of roughly 1.3% against the yen, its best performance since August.
The Aussie and the kiwi were headed for a 2.4% and 1.8% weekly decline against the dollar respectively, their steepest drop in months.
“Even though we don’t expect Powell to deliver on the tightening bias, that tightening bias does support the dollar,” said Carol Kong, currency strategist at Commonwealth Bank of Australia.
Falling oil prices and a faltering economic recovery in China have also kept a lid on the Antipodean currencies. Australia’s central bank raised forecasts for economic growth and employment but warned there were risks of further upside surprises to inflation.
The euro steadied at $1.0668 while sterling slipped 0.02% to $1.2218. They were both on track to lose 0.56% and 1.3% for the week, respectively.
In cryptocurrencies, bitcoin and ether held near their peaks with bitcoin buying $36,519 and ether at $2,102.90. Prices of these digital assets have surged on swirling speculation of an imminent approval of BlackRock’s spot bitcoin ETF, with the asset management firm also having registered to create an ethereum trust.
“The potential approval of spot ETFs by the (U.S. Securities and Exchange Commission) could significantly impact the cryptocurrency sector,” said Carl Szantyr, managing partner of digital asset hedge fund Blockstone Capital. “Such an endorsement would make it more accessible for institutional investors to enter the crypto space, likely boosting demand and subsequently, prices.”
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