EUR/USD and GBP/USD fell to their lowest since April and September 2020, respectively, as worries about global growth boosted the haven dollar, though repatriation flows made the oversold yen the big winner.
Adding to the air of uncertainty and demand for the yen and dollar were concerns that the slowing Chinese economy could be hit with COVID lockdowns in Beijing nL2N2WN0JE and the yuan's tumble to its lowest since 2020 that prompted the PBOC to cut bank's FX reserves ratio by 100bp to perhaps cushion the yuan's fall nL2N2WN0SG.
The dollar index hit its highest since the March 2020 early pandemic high nL2N2WN14G, with markets becoming concerned that the Fed may tighten policy too much now augmenting safe-haven flows into the U.S. currency.
The rise in Treasury yields at the middle of the maturity spectrum toward 3% last week enhanced the dollar's attraction as a relatively high-yielding safe haven.
EUR/USD was down 0.8% with a 1.2697 low on EBS finding some support near 1.2700 and not far from 2020's 1.0636 pandemic nadir.
Though the latest Ifo report suggested Germany was holding up better than expected amid the Ukraine war nS8N2VL02U, the euro zone is seen more at risk than the U.S. and dependent on China for growth.
If 2020's lows give way, 2017's 1.0340 lows -- the weakest since 2003 -- could be next nL2N2WN13N.
Risk-sensitive sterling was down 0.84%, tumbling well below the 50% Fibo of the entire 2020-21 pandemic recovery at 1.2831, with the current 1.2725 low its lowest since September 2020's 1.2676 big pullback low.
With Fed rate hike pricing running ahead of the BoE and UK consumers and businesses hit by soaring inflation nL5N2WN2I3, sterling looks headed for the 61.8% Fibo at 1.2497 nL2N2WN1I6.
Next week's BoE meeting will settle market uncertainty about the bank perhaps hiking more than the largely expected 25bp, with Fed seen delivering two consecutive 50bp increases.
USD/JPY was down 0.4%, a modest loss compared to AUD/JPY, GBP/JPY and EUR/JPY drops of roughly 1.5%, 1.3% and 1.3%, respectively.
The combination of risk-off repatriation flows and profit-taking on hefty spec yen shorts got USD/JPY down to 127.525 on EBS, by the uptrend line from March at 127.54 and Wednesday 127.465 initial correction low.
Falling Treasury yields dragged yields spreads and USD/JPY lower, but a close below the 10-day moving average at 127.20 is needed to target to props by 125 nL2N2WN16O.
A somewhat expected Japanese fiscal stimulus package may offset some of the imported inflationary pressures nFWN2WN14O, but won't change the BOJ's QE-dependent yield curve control policy nN9N2TD01L.
High-beta and commodity currencies fell, particularly those tied to tumbling oil prices and China.
Ether and bitcoin were little changed, recovering from early losses.
Tuesday brings U.S. durable goods, home sales and Conference Board April consumer confidence, while key quarterly earnings reports nL2N2WK2FD could affect risk sentiment.
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