By Saikat Chatterjee
LONDON, March 18 (Reuters) – The euro fell on Friday but headed for its biggest weekly gain in six weeks, with traders breathing a sigh of relief after Russia avoided a default on its dollar-denominated debt and markets weighed the impact. broadest of the beginning of the rate hike cycle in the United States.
* The currency was lower towards the $1.10 level, although broad dollar losses and upbeat comments from European policymakers support the euro. Dutch central bank chief Klaas Knot said he expects only one rate hike this year.
* Thursday’s rebound in world markets, including stocks, bonds and commodities, will surely keep investors eager to buy assets at the first hint of an end to the war in Ukraine.
* “This week has shown the market’s appetite to add risk back into portfolios now that the geopolitical backdrop has stabilized a bit,” said Simon Harvey, head of currency research at Monex Europe.
* The euro was down 0.5% at $1.1037 but up 1.52% for the week, on track for its biggest weekly gain since the start of February, when European Central Bank President Christine Lagarde first signaled that interest rates will rise in the eurozone in 2022.
* The dollar index was up 0.4% at 98.36, after being down every other day of the week, and headed for a 1% loss in the period.
* “The dollar seems to be reaching a ceiling, at a time when the market is pricing in hikes from the Federal Reserve, so the key will be inflation: if it continues to surprise on the upside, the question will be whether the Fed becomes even more aggression,” said Shinichiro Kadota, a foreign exchange strategist at Barclays in Tokyo.
* The yen will be near its lowest level in six years after the Bank of Japan left its monetary policy unchanged on Friday, as expected, making it an exception among central banks in the developed world that are abandoning emergency measures due to the coronavirus pandemic.
* Script currencies will take a hit overall, with Bitcoin and Ether down 1.5% and 1% respectively.
(Reporting by Saikat Chatterjee; additional reporting by Kevin Buckland in Tokyo; Spanish editing by Javier Leira)