The U.S. dollar climbed to a two-week high on Thursday as renewed volatility swept through equity and precious metals markets, prompting investors to adopt a more cautious, risk-off stance ahead of key interest rate decisions from the European Central Bank and the Bank of England.
The dollar index, which tracks the greenback against a basket of six major currencies, was last up 0.1% at 97.762, extending its advance for a second straight session.
“There’s a bit of risk aversion coming through,” said Sim Moh Siong, currency strategist at OCBC in Singapore. “When risk appetite fades, the dollar typically benefits.”
The greenback has regained momentum this week as global markets turn defensive, with investors reassessing U.S. corporate earnings as reporting season moves past its midpoint.
Risk-off mood rattles metals and equities
Gold and silver saw sharp swings once again, as speculative positioning and leveraged trades amplified moves. Silver was hit particularly hard, plunging as much as 16.6% to a low of $73.41 during Thursday’s session.
U.S. equities also remained under pressure. The Nasdaq Composite has fallen 2.9% over the past two days, marking its steepest decline since October. Volatility has been driven by heavyweight names, including Alphabet, which unveiled aggressive capital spending plans, and a broader selloff in software stocks as markets adjust to rapid advances in generative AI.
FX markets eye central banks
In currency trading, the dollar held steady against the Japanese yen at 156.81, supported by solid demand at an auction of 30-year Japanese government bonds. Attention in Japan has also turned to the final days of the national election campaign ahead of Sunday’s vote.
The euro slipped 0.2% to $1.1790 ahead of the ECB’s policy decision, where rates are widely expected to remain unchanged. Investors are focused on the post-meeting press conference for clues on the future path of monetary policy.
Analysts at Bank of America said the ECB is likely to emphasize heightened uncertainty, with only limited changes to its messaging. While they see the possibility of a rate cut in March as uncertain, they continue to expect an overall easing bias.
Sterling also edged lower, with the pound down 0.2% at $1.3621 ahead of the BoE’s decision, where policymakers are likewise expected to keep rates on hold.
Fed outlook, Asia FX and crypto under pressure
During Asian trading hours, Federal Reserve Governor Lisa Cook said she is more concerned about stalled progress on inflation than signs of labor market weakness, signaling little appetite for near-term rate cuts until tariff-related price pressures ease.
According to the CME Group’s FedWatch tool, markets are pricing an 88% chance that the Fed will hold rates steady at its March meeting, though expectations for a cut have edged slightly higher.
The dollar was little changed against the offshore yuan at 6.9439 following a phone call between Donald Trump and Xi Jinping, during which the leaders discussed trade, security issues and U.S. arms sales to Taiwan.
Risk-sensitive currencies in the Asia-Pacific region weakened as sentiment deteriorated. The Australian dollar fell 0.4% to $0.6968, surrendering earlier gains despite slightly better-than-expected trade data, while the New Zealand dollar slipped 0.3% to $0.5986.
Cryptocurrencies also extended their slide, with digital assets dropping to their lowest levels since November 2024. Bitcoin fell as much as 3.5% to $70,052, while ether declined 1.3% to $2,098.
