The dollar index fell to a 1-week low, down -0.83%, due to Chinese regulators advising financial institutions to reduce US Treasuries holdings. Chinese yuan strength further weakened the dollar, as did National Economic Council Director Hassett’s warning of lower US job numbers. The dollar remains under pressure from a growing budget deficit and political tensions. Swaps markets predict a -25 bp rate cut in the next policy meeting.

EUR/USD rallied to a 1-week high, up +0.88%, lifted by a weaker dollar and positive Eurozone Feb Sentix investor confidence index climbing to a 7-month high of 4.2. ECB Governing Council member Kazimir stated interest rates should only be altered in specific scenarios. Swaps discount a 2% chance of a -25 bp rate cut by the ECB in March.

USD/JPY fell -0.91% as the yen rebounded from a 2-week low against the dollar, driven by Japanese Finance Minister Katayama’s comments on market communication and stability. Japanese Prime Minister Takaichi’s election victory and weaker economic data weighed on the yen. The Japan Jan eco watchers outlook survey rose +0.6 to 50.1, below expectations. Markets predict a +27% chance of a BOJ rate hike in March.

Gold and silver prices rose significantly as the dollar index fell to a 1-week low. Concerns over foreign investors diverting assets to precious metals due to US debt reduction warnings also supported prices. Safe-haven demand, geopolitical risks, and dollar debasement further boosted precious metals. Central bank demand for gold remained strong, with China’s PBOC increasing reserves.

Long holdings in gold and silver ETFs have been climbing, with gold ETFs hitting a 3.5-year high on January 28 and silver ETFs reaching a 3.5-year high on December 23. President Trump’s nomination of Keven Warsh as Fed Chair led to a plunge in gold and silver prices on January 30, amid fears of less supportive interest rate policies.

Read more at Yahoo Finance: Dollar Falls on Fears Foreign Dollar Demand Will Weaken