Dollar on track for a drop this week as positive market sentiment hits

Dollar on track for a drop this week as positive market sentiment hits

The Dollar index, which measures the greenback against six rivals, was small altered at 94.034 on Friday. It was on track for a 0.1% decline this week despite hitting the highest since 25 September of last year at 94.563 on Tuesday.

Newly improved market sentiment, which has lifted global stocks, commodity prices and bond yields, also weighs on the safe-haven dollar.

Only against the yen - another safe haven - has the dollar managed to maintain the momentum of the past five weeks, rising on Friday 0.16% and touching 113.885 yen for the first time since December of 2018.

We end the week with risk flying, Chris Weston, head of research at the brokerage Pepperstone in Melbourne, wrote in a client note.

Equities are going up hard, Weston said, and the JPY has no place as hedge, because it would drag overall portfolio performance, he said.

The greenback had rallied since September on expectations that the U.S central bank would tighten monetary policy more quickly than expected amid an improving economy and surging energy prices.

Minutes of Fed January meeting confirmed this week that a tapering of stimulus is all but certain to start this year, although policymakers are sharply divided over inflation and what they should do about it.

Money markets are currently pricing in as near 50-50 odds of a 25 basis points rate hike by July.

The dollar index looks a little shaky, but any slippage should prove modest with Fed tapering now imminent, Westpac strategists wrote in a client note.

Any dips in the index should be limited to 93.70, they said.

The next major test of the U.S. economy begins later on Friday with the release of retail sales figures.

The Euro was slipped 0.09% to $1.1588 after touching on Thursday for the first time since Sept. 4 that it had touched $1.1624 again.

Sterling was little changed at $1.36705, following its climb to the highest since 24 Sept. at $1.3734 overnight.

The risk sensitive USD opened $0.74105 of low against the dollar, after reaching a high of $17.2265 in the previous session for more than one month.

New Zealand's kiwi dollar gained 0.06% to $0.7033, holding most of Thursday's 1% surge that brought it to the highest since Sept. 24 at $0.70415.

In cryptocurrencies, bitcoin had around $57,200 after touching a five-month high of $58,550 on Thursday.

Smaller rival ether traded at around $3,780, still close to a more than one-month high of $3,825. 89 reached overnight.