Title: Dollar Lower, Yen Gains; Central Bank Actions in Focus

Mar 25, 2022 04:16AM ET

By: AnalysisWatch

The US dollar eased slightly on Friday, while the heavily battered Japanese yen gained some breathing space at the end of a week that has seen expectations of faster monetary tightening by the US Federal Reserve rise.

At 4:15 AM ET, the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.2% lower at 98.655.

The dollar saw some buying this week as a number of Federal Reserve policymakers signaled that the central bank is ready to take strong action to fight inflation, which is at a 40-year high.

The benchmark 10-year yield in the United States last traded at 2.36%, not far from its highest level since 2019, offering support to the dollar.

The USD/JPY fell 0.6% to 121.65, off its six-year high, after the Bank of Japan failed to intervene as selling pushed its 10-year government bond yields near its target of 0.25%, climbing 3 basis points to a six-year high of 0.24%.

Although the lack of intervention suggests policy flexibility, the yield differential suggests that USD/JPY has further to rise.

Elsewhere, EUR/USD rose 0.1% to 1.1012, supported by falling European natural gas prices as an agreement between President Joe Biden and the European Union paved the way for more imports from the US to reduce the Union's dependence on Russian energy, to be announced on Friday.

GBP/USD fell 0.1% to 1.3175 after UK retail sales unexpectedly fell 0.3% in February from January, while a 0.6% rise had been expected.

UK inflation rose to a fresh 30-year high of 6.2% last month, at the upper end of expectations.

The AUD/USD fell 0.1% to 0.7507 and the NZD/USD fell 0.1% to 0.6958, giving back a small part of their recent gains, while the USD/CNY fell 0.1% to 6.3656.