The greenback hovered over one-month lows against the other major currencies on Friday, as sentiment was boosted following China’s central bank decision to raise yuan’s fixed rate and as the ECB highlighted that that there are still policy options available on the table.
People’s Bank of China boosted the fixed rate of the yuan, following euro’s rally a day before, after Mario Draghi commented that the European Central Bank would not reduce interest rates any further. The ECB’s move strengthened commodity prices, as well as the commodity-related currencies, sending the U.S. dollar broadly lower.
In the meantime, ECB Governing Council Member Erkki Liikanen stressed on Friday, that the central bank still had policy options available to bolster the economy, as it will continue to support it until it reached the 2% inflation target.
The comments came a day after the bank delivered a strong package of stimulus measures, trimming all three key rates to new record lows and reinforcing its quantitative easing programme. It is notable, that the euro registered its largest one-day gain in a month, after Draghi said that the central bank will probably not trim interest rates further into negative territory.
The single currency retreated from early gains on Friday, with EUR/USD losing 0.27% to trade at 1.1148 in late session. The euro, however, still finished the week higher by 1.43%. On the contrary, the U.S. dollar index was unchanged at 96.23 during late Friday trade, hovering over one-month lows of 95.94. The index finished the week with 1.2% loss, marking its second consecutive decline.
However, the greenback was higher against the Japanese yen, as risk appetite was boosted, with USD/JPY gaining 0.56% to 133.82. Elsewhere, the Aussie and Kiwi dollars rallied, with AUD/USD jumping 1.48% to 0.7563 and NZD/USD rising 1.1.4% to trade at 0.6743. The Canadian dollar climbed to four-month highs, with USD/CAD losing 0.98% at 1.3214 in late trade, as a rally in oil prices counterbalanced a soft Canadian jobs report.
In the coming week, focus will be on Wednesday’s outcome of the Fed’s latest policy meeting, with investors anticipating to leave interest rates unchanged, after raising them in December for the first time in almost a decade. Market participants will also be observing central bank meetings going to be held in Switzerland and Japan.