By Gregor Stuart Hunter
SINGAPORE, Feb 5 (Reuters) – The dollar climbed to a two-week high on Thursday as fresh volatility gripped stocks and precious metals, while traders counted down to rate decisions from the European Central Bank and the Bank of England. The U.S. dollar index, which measures the greenback’s strength against a basket of six currencies, was last up 0.1% at 97.762, extending gains into a second day.
“There’s a bit of risk aversion coming through,” said Sim Moh Siong, currency strategist at OCBC in Singapore. “When there’s risk aversion, the dollar tends to strengthen.”
The dollar has regained some strength this week and stocks turned risk-off as financial markets assess U.S. corporate earnings season, now halfway complete.
Gold and silver, which have become more volatile recently as a result of leveraged buying and speculative flows, were rocked by a fresh selloff on Thursday, which saw silver falling as much as 16.6% to a low of $73.41.
The Nasdaq Composite has fallen 2.9% during the past two days, its biggest slide since October, with volatility triggered by market bellwethers including Google parent Alphabet, which reported aggressive spending plans on Wednesday, and a rout in software stocks as they adapt to a new era of generative AI.
Against the yen, the U.S. dollar was trading at 156.81 yen, holding steady after an auction of 30-year Japanese government bonds drew solid demand, while Japan’s election campaign entered its final stretch ahead of Sunday’s poll. The euro was last down 0.2% at $1.1790 ahead of the ECB decision, where it is expected to keep rates on hold. Investors’ attention will be focused on the post-policy press conference to gauge the outlook for rates over the coming months.
“The emphasis will likely be on higher uncertainty,” with only minor tweaks in communication, according to analysts from Bank of America, who expect the ECB to hold rates later in the day. “Our conviction in a March cut is not rock solid, but we remain convinced of an easing bias from here.”
The British pound was last down 0.2% at $1.3621ahead of the BoE’s policy decision, at which it is also expected to remain on hold.
As the Asian trading session began, Federal Reserve Governor Lisa Cook said in a speech she is more concerned about stalled progress on inflation than a weakening labour market, a strong signal that she will not support another interest-rate cut until tariff-induced price pressures begin to recede.
Fed funds futures are pricing an implied 88% probability that the U.S. central bank will hold rates at its next two-day meeting ending on March 18, though bets on a rate cut edged up to 12% from 9.4% a day earlier, according to the CME Group’s FedWatch tool. Against the offshore yuan, the U.S. dollar was last flat at 6.9439 yuan following a phone call between U.S. President Donald Trump and Chinese counterpart Xi Jinping in which they discussed trade, security issues and U.S. arms sales to Taiwan.
Antipodean currencies, which often mirror global risk appetite, saw their strength fade during the trading session as investor confidence dimmed.
The Australian dollar fell 0.4% to $0.6968, giving up earlier gains following the release of trade balance data which was a little ahead of market estimates. The New Zealand dollar was last down 0.3% at $0.5986.
Cryptocurrencies extended losses after a selloff, which saw digital assets fall to the lowest since November 2024, with bitcoin tumbling as much as 3.54% to $70,052.48, and ether off 1.3% at $2,098.44.
(Reporting by Gregor Stuart Hunter; Editing by Shri Navaratnam and Sam Holmes)
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