The USD index headed toward the close on Tuesday little changed but off earlier highs following a session marked mostly by unwinding of Monday's safe-haven flows.

The rise in Treasury bond yields from recent lows helped boost the dollar, though gains may be tempered by less-hawkish Fed rate expectations as fed fund futures are pricing in near 60bp of rate cuts by December 2023.

Upcoming PPI data and retail sales on Wednesday and Friday’s industrial production and manufacturing output will be parsed for hints at upcoming Fed policy as markets try to discern whether the collapse of two U.S. banks will lead to a crisis for the financial sector.

EUR/USD, the largest component of the dollar index, gained 0.02% to 1.0735, hovering near its weekly high at 1.0750.

The euro firmed as rate markets, as indicated by IRPR on Eikon, are still pricing in a 78% chance for a 50bp ECB hike on Thursday.

USD/JPY rallied 0.85% to 134.40 as rising Treasury yields reversed the previous sessions falling-rate-related dollar selloff.

Higher U.S. yields are once again stirring divergence from low-rate Japan, weighing on the yen.

USD/JPY finds resistance at Tuesday’s 134.90 high, though doubts about the Fed’s willingness to remain high-for-longer amid banking strains may prod traders to test Monday lows by the 55-DMA at 132.50.

GBP/USD dipped slightly into the NorAm close, -0.1% at 1.2173.
The pound hovered near 4-week highs put in after U.S. CPI came in as forecast, slightly lower than January.

Converging U.S. and UK rate expectation amid falling U.S. inflation and the lingering banking crisis may enable GBP traders to test 2023 highs above 1.24.

Crytocurrencies tracked higher still, BTC gaining a further 5% to $25.4k, though off 9-month highs by $26.5k.
Cryptocurrencies gained on the lower Fed rate outlook, the government bailout of SVB and Signature Bank, as well as the perceived independence from established central banks.

Commodities broadly weak, gold -0.2% on rising global yields, oil -3.6% and copper down 1.5% amid growing concern the banking strains may reduce global liquidity and reduce growth.

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