The dollar index fell 0.65% on Friday, still on the backfoot after this week's rescue packages for Credit Suisse and First Republic reversed contagion-related haven flows into the U.S. currency, though markets remained on edge as investors appeared to be in capital preservation mode.

Equities fell as investors continued to rush into global sovereign bonds, with the decline in Treasury yields helping to push the dollar lower, especially as the banking turmoil dents Fed rate expectations no matter what policy decision the U.S. central bank makes at its meeting next week.

Traders are pricing in a steady-to-lower Fed rate path in a dramatic shift from the higher-for-longer expectations that prevailed earlier this month.

Another event that triggers a surge in global banking fears could send the dollar higher, but until then, the grind lower in Fed expectations will take a toll.

EUR/USD rallied 0.65% to 1.0680.
The market rewarded EUR holders after the ECB hiked 50bp on Thursday, with Euribor futures pricing in another hike by June and euro zone rates then seen holding steady into 2024.

USD/JPY slid 1.57% to 131.65, falling to a new March low at 131.56.
A close below the 55-DMA at 132.51, which has been probed in four of the last five trading sessions, is likely to reward USD/JPY shorts, with likely targets at the Feb.
13 low of 131.11 and 129.80, the Feb.
10 low.

GBP/USD headed toward the NorAm close by session highs, up 0.7% at 1.2198.
Sterling benefited from the unwinding of bank contagion-related dollar longs and lower Fed rate expectations.

Thursday’s BOE meeting is coming into focus, with traders expecting a 25bp hike and the beginning of shift to a more dovish position.

Equities were down more than 1% heading into the NorAm close, and oil was off 2.3% as lingering growth fears weighed on risk.

Cryptocurrencies were higher, bitcoin rallying 5.3% and ether up 3.5% as alternatives to mainstream assets.
Gold gained another 3% to $1,977 as an inflation hedge and non-dollar store of value.
Note BTC/XAU was trading near 9-month highs as bitcoin gains have been outstripping gold.

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