Investing.com – The U.S. dollar retreated on Friday as a bruising rout in global technology equities triggered a scramble for safe-haven sovereign paper, while the euro and Japanese yen consolidated gains following a flurry of central bank rate freezes across major capitals.
The U.S. Dollar Index fell 0.2% to 101.81 as tumbling yields on U.S. Treasuries and German Bunds reduced the greenback’s immediate interest rate premium. Even with the day’s softness, the dollar remained poised to secure a 0.3% gain in October, locking in a second straight monthly advance supported by solid U.S. third-quarter growth and elevated geopolitical risk premiums.
The week brought synchronized breathers from major monetary authorities. The Federal Reserve, the European Central Bank, the Reserve Bank of New Zealand, and the Bank of Japan all left borrowing costs unchanged.
Yet foreign exchange desks characterized the collective stance as an uneasy holding pattern rather than a dovish pivot, with Brent crude hovering above $117 a barrel and Middle East hostilities showing no signs of de-escalation.
Euro extends rebound on Lagarde dissents
The euro gained 0.16% to trade at $1.1199, marking its third straight daily rise and rebounding from a 17-month trough hit on Thursday.
Despite the three-day bounce, the single currency was headed for a 1.2% decline over October, weighed down by widening French sovereign spreads and the drag of elevated energy import bills on the bloc’s terms of trade.
Investor sentiment around the shared currency stabilized after ECB President Christine Lagarde confirmed that policymakers held an active debate over whether a rate hike was warranted this week, before deciding to keep the benchmark deposit rate steady at 2.50%.
Lagarde, who unexpectedly announced she will step down as ECB chief in February – eight months ahead of schedule – signaled that higher global bond yields were tightening financial conditions without requiring immediate central bank intervention.
However, evidence that hawks on the Governing Council pressed for tighter policy spurred money markets to price in a roughly two-in-three probability of a rate hike in December.
