The dollar index rose 0.24% on Wednesday, but largely due to USD/JPY's surge amid widespread unwinding of long haven yen trades as banking sector angst receded further.
The unwinding of flight-to-safety trades became choppier and more focused on selling the yen, which fell more than 1% against the euro and sterling.
The risk-on rebound in Treasury yields found buyers as yields got closer to last week's recovery highs amid a second round of Fed and other U.S. bank regulators being grilled in Congress over recent bank failures.
Thursday and Friday's Fed reports on bank borrowing and deposits will be used to gauge whether the worst of the reactions to recent bank failures has passed.
That will feed into expectations for further Fed hikes and assess whether the sharp H2 cuts that had been priced in recently -- despite policymakers' reluctance to broach the subject of easing -- will continue to be trimmed.
The EUR/USD was close to unchanged and in the middle of Wednesday's 1.08175-872 range on EBS, still shy of last week's 1.0930 peak.
Markets are gauging whether upbeat U.S. consumer confidence, despite March banking woes, is risk-on and haven dollar off or a glimpse at why the Fed's rate path might be higher than currently priced.
USD/JPY rose 1.35% predominantly on yen selling, but earlier also from Treasury yields and stocks both advancing.
The rally now faces resistance by 133 and 133.80, assuming banking angst eases further.
Speculation regarding how and when the BoJ might reduce its extreme easing measures persists, but there's no pressure on its yield curve cap now and cost-push inflation would have to become demand driven for a major policy change.
Sterling fell 0.3% after earlier hitting an eight-week high of 1.2362.
core PCE is out Friday, with March ISMs and non-farm payrolls next week.
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