Ahead of ECB-BoE Decisions, Dollar Becomes "Safe Play"
The US dollar returned to the market's favor on Thursday (February 5th), as volatility in stocks and precious metals triggered a renewed risk-off mood. The dollar index (DXY) edged up around 0.1% to 97.762—its highest level in approximately two weeks.
The dollar's strengthening occurred at a sensitive time: investors were counting down to the ECB and Bank of England interest rate decisions. The euro weakened around 0.2% to $1.1790, while the pound also fell 0.2% to $1.3621 as markets held their nerve ahead of the central bank's press conference and subsequent policy direction.
In Asia, USD/JPY held high around 156.81, helped by strong demand at the Japanese government bond auction and political tensions ahead of the weekend's elections.
From the Fed's perspective, more cautious comments on inflation also strengthened the dollar. The market is reading signals that interest rate cuts won't be "that quick," especially amid the uncertainty that arose over the US central bank's independence issue.
Meanwhile, commodity currencies also came under pressure: AUD/USD fell around 0.4% to $0.6968, and NZD/USD weakened, last trading around 0.5985 (previously 0.6004). The offshore yuan remained relatively stable, with USD/CNH trading around 6.944.
Source: Newsmaker.id
