Dollar heads for first weekly loss in five, crypto falls

LONDON, March 3 (Reuters) – The U.S. dollar fell from a 2-1/2-month high against the yen on Friday and appeared poised for its first weekly loss since January against major peers as traders tried to measure the trajectory of Federal Reserve Policy.

The yen, which is particularly sensitive to US-Japanese long-term interest rate differentials, threatened to extend its latest losing streak to seven weeks, although it strengthened on Friday with 10-year US yields pulling back from near four-month highs near 4 .1%.

Cryptocurrencies took a beating as the crisis surrounding Silvergate worsened, with industry heavyweights including Coinbase Global and Galaxy Digital dropping the lender as a banking partner.

The dollar index , which measures the currency against the yen, euro and four other major peers, fell 0.24% to 104.71, from as high as 105.36 at the start of the week, which was the strongest level since January 6. Since last Friday, the index has fallen 0.5%.

Taking some of the steam out of the dollar and the breathless advance in US interest rates were comments from Fed policymakers, including Atlanta Fed President Raphael Bostic who said “slow and steady is going to be the way to go,” despite new jobs numbers contributed to the recent period with strong data.

“Yesterday’s Fed speakers – Collins, Waller and Bostic all appeared to be content with 25bp hikes for now,” Mizuho senior economist Colin Asher said in a note.

“Most people noted a possible need to push speeds higher if the data continues to come in – suggesting data dependency,” Asher added.

Analysts polled by Reuters said recent dollar strength is temporary and the currency will weaken over the course of the year amid an improving global economy and expectations that the Fed will stop raising interest rates well before the European Central Bank.

“Much of the dollar strength seen in February has probably run its course now,” said Michael Brown, market analyst at TraderX.

“I wouldn’t be surprised to see some consolidation before (Fed Chair) Powell speaks next week and the jobs report on Friday, with the bar for significant further gains in the dollar pretty high at this point,” Brown added.

The Bank of Japan (BOJ), meanwhile, is expected to start dismantling extraordinary stimulus measures some time after Governor Haruhiko Kuroda retires next month.

Tokyo inflation data for February exceeded the BOJ’s target for a ninth month, but the core measure eased from a 42-year high.

The dollar fell 0.33% to 136.32 yen , after climbing to 137.10 overnight, its highest since Dec. 20. For the week, the dollar is slightly above flat, but any gains will preserve its winning streak since mid-January.

The euro rose 0.18% to $1.0616, having climbed off a near two-month low of $1.0533 earlier in the week. Since last Friday, it is up 0.7%.

Sterling added 0.34% to $1.1988, on course for a weekly gain of 0.4%.

The Aussie rallied 0.48% to $0.6762, up 0.54% for the week.

Bitcoin rallied 4.5% to $22,403, earlier touching a 2 1/2-week low of $22,000. Ether fell 4.7% to $1,570.30 after touching $1,543.60, also the first since mid-February.

Reporting by Samuel Indyk in London and Kevin Buckland in Tokyo; Editing by Christopher Cushing and Kim Coghill

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