Title: Dollar set for first losing week in seven amid U.S. yield retreat

May 20, 2022 12:51AM ET

By: AnalysisWatch

On Friday, the US dollar headed for its worst week since early February against its major counterparts, weighed down by a drop in Treasury yields and fatigue after the currency's 14-week 10% surge.

The dollar index, which measures it against its six major rivals, tried to regain some ground over the weekend, rising 0.05% to 102.96, but was down 1.42% for the week, on track to break a six-week winning run. Last Friday, it had touched a high since January 2003, at 105.01.

Even as global equities slipped this week due to risks to growth from aggressive monetary tightening - led by the Federal Reserve - and China's tightening measures to halt a COVID-19 outbreak, the dollar's appeal as a safe haven asset was eclipsed overnight by a drop in US yields as investors rushed to the safety of Treasury bonds.

The yield on the benchmark 10-year Treasury fell Thursday to a three-week low of 2.772 per cent from a three-and-a-half-year high of more than 3.2 per cent earlier in the month.

Other safe-haven currencies continued to rise overnight as a key index of global equities headed for its seventh weekly decline, the longest ever.

The yen rose slightly on Friday, heading for its second consecutive weekly advance, with the dollar falling 0.84 percent to 128.13 yen during the period.

Fears are growing that the Fed and other central banks have fallen behind in the fight against super-accelerating inflation and will have to be increasingly aggressive in tightening policy, inflicting pain on the economy as a result.

The antipodean currencies drew support from signs of reopening in their main trading partner, with the Aussie gaining 1.24% and the Kiwi 1.51% this week.

However, the Australian currency slipped on Friday, falling 0.35 per cent to $0.7023, after surging 1.33 per cent in the previous session.

The pound slipped 0.11 per cent to $1.2457, but rose 1.49 per cent on the week, its best performance since late 2020.