The dollar index eased slightly into the weekend on Friday, but it remained near recent trend highs as risk markets staged a tepid rally and recent buyers reduced positions in the U.S. currency.
Despite improving sentiment, COVID concerns combined with fears about the global growth outlook -- particularly in China -- and worries about the Fed's intentions to taper its asset purchases remained issues that could return to haunt investors in the coming sessions.
Markets were awaiting next week's main event, the Kansas City Fed's Jackson Hole Economic Symposium, which could boost the dollar further from recent nine-month highs if Fed Chair Jerome Powell outlines a clear roadmap to reducing monetary accommodation.
A more equivocal tone from the U.S. central bank chief might pause the dollar's recent advance.
EUR/USD eked out 0.14% gain but was on track in late trade to close below 1.17, indicating mounting weakness.
Daily technicals hinted at growing correction risk, though monthly indicators were bearish, suggesting any rebound would be shallow.
USD/JPY edged 0.08% higher, with the yen's haven status ebbing as risk rallied in the wake of persistent selling this week. A test of July 2’s 2021 high at 111.66 is possible if the Fed creates a hawkish impression at Jackson Hole.
GBP/USD remained offered and was down 1.96% month-to-date, but it found support just ahead of 1.36. Friday’s drop aided by weak UK retail sales, which coupled with COVID concerns and recent spate of weak British data has diminished BoE taper expectations and flattened the short-sterling rate strip after an initial hike expected in Q2 2022.
AUD/USD fell a further 0.2% to 0.7133, with COVID concerns weighing on the Australian economy.
The risk rally provided a boost for bitcoin, which rallied 4% to 48.4k.
BTC put in new trend high at 49.1k. The recent rise in the 10-day moving average above the 200-DMA hints at further strength.
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