The dollar index (DXY) increased by 0.42% on Friday, driven by a weakening stock market and rising Treasury yields, as well as ongoing geopolitical tensions in Iran, which have heightened demand for safe-haven assets. Market expectations reflect a 12% probability of a 25 basis point rate hike at the Federal Open Market Committee (FOMC) meeting set for April 28-29, 2023.
In contrast, the euro fell by 0.31% against the dollar, influenced by disappointing German producer price index data, which posted a significant year-over-year decline of 3.3%, the largest drop in 1.75 years. Market sentiment indicates an 80% likelihood of a 25 basis point rate increase by the European Central Bank (ECB) at its April 30 meeting.
The Japanese yen depreciated by 1.02% due to a stronger dollar and increasing U.S. Treasury yields, compounded by a surge in crude oil prices, which negatively impacts Japan’s import-dependent economy. Additionally, there’s a 61% chance of a 25 basis point rate hike by the Bank of Japan at its upcoming April 28 meeting.
