The US dollar index grew moderately versus its rivals. In the Asian session, it reached 102.4. Nevertheless, the greenback is still below the levels of Wednesday and Thursday.

On Friday, the US dollar was moving in a narrow range of 102.1– 102.3. Its trajectory will mainly depend on the Core PCE Price Index which is on tap in the American session.

US government bonds also climbed amid hawkish comments from Fed policymakers. This is always bullish for the greenback. As a result, the yield on 2-year government bonds hit 4.1% today. Yet, there is one problem.

While short-term Treasury notes and the US dollar are growing, the yield of 10-year bonds amounts to 3.6%. As a reminder, an inverted yield curve is an unusual state in which longer-term bonds have a lower yield than short-term ones. Technically, it signals the risk of a recession.

The risk of a recession could have undermined the safe-haven status of the greenback. However, this is hardly unlikely given that woes in the banking crisis, which could have affected safe-haven assets, have receded.

Prompt and coordinated actions taken by central banks and governments to ensure liquidity have restored confidence in the banking sector. Therefore, the yen along with other safe-haven assets like gold and the Swiss franc has weakened significantly this week. The dollar/yen pair entered the upward range of 132.5-133.5 early Friday.

The fiscal year in Japan has come to an end. Capital inflows to the yen have stopped. Hence, the US dollar is again stronger. This is why the pair eventually rose to 133.1.

The incumbent governor of the Bank of Japan will step down from his post on April 8. The downward movement of the yen is likely to be limited until then. BOJ Deputy Governor Shinichi Uchida said that a tweak to the bond yield control policy would "undoubtedly" become an option if economic and price conditions justify phasing out stimulus.

This comment could have been considered bullish if not one detail. Markets have heard such statements from BoJ officials many times. Besides, the Tokyo CPI slightly declined. It means that a soft monetary policy works.

Investors are skeptical that new leadership will change monetary policy parameters. It will not happen before April 8. After that, Kazuo Ueda will become the BoJ governor. Should speculators expect any adjustments?

Back in July last year, he wrote a column in the Nikkei newspaper. A 71-year-old economics professor stressed that the country's monetary policy should be revised. The regulator will have to stop its endless monetary softening sooner or later. It will be curious to see whether he still sticks to this opinion. As a rule, Japanese policymakers are not prone to sudden changes.

Commodity currencies usually react rather sharply to signals. Today, market sentiment has changed many times.

Upbeat macro stats from China and the general weakness of the US dollar pushed the Aussie to the weekly high. At first, it jumped to 0.6767. However, later, it sharply fell to 0.6672.

It will hardly get any support from the RBA. The regulator intends to take a pause in monetary tightening at its meeting on April 4. Besides, the Australian dollar may face bearish pressure after the release of US economic reports.

However, even if it stumbles, the bullish sentiment will remain strong. Sharp price swings in the range of 0.6671-0.6739 indicate that the Australian dollar is not ready to surrender. So, the AUD/USD pair is likely to resume an upward movement amid positive drivers.

For the New Zealand dollar, such a moment has already come. The Reserve Bank of New Zealand is widely expected to raise the key rate again at its meeting on April 5. The kiwi managed to reach a 6-week high of 0.6297.

Over the month, the kiwi/dollar grew by more than 1%. It closed the last week of March with an increase of 1%. It was moving in the bullish range of 0.6248-0.6299. The kiwi touched 0.6273 in the Asian session.

00:00 Intro
00:34 Asian-Pacific region
01:12 CME FedWatch Tool
01:52 USDX
02:51 2-year Treasury yield
03:36 USD/JPY
06:16 AUD/USD
07:25 NZD/USD


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