Currency markets subdued ahead of pivotal central bank week

Major currencies traded in narrow ranges at the start of a busy week featuring central bank announcements and corporate earnings, as falling oil prices and Treasury yields put downward pressure on the dollar. Brent crude futures fell more than 1% to around $115 a barrel after reaching a six-month peak last week, following a Reuters report that Qatari mediators were in Tehran to help de-escalate regional tensions alongside the US.

Meanwhile, US Treasuries maintained gains from a recent safe-haven rally, with yields on the 10-year note at 4.974% and on the 30-year note at 5.299%, near one-month lows. Ray Attrill, head of FX strategy at National Australia Bank, noted that the US bond market appeared to be driving the dollar's direction. The euro gained 0.16% to $1.122, buoyed by optimism that France would avoid a Moody's downgrade despite social unrest, while the British pound rose 0.1% to $1.3385.

The dollar index dipped slightly to 101.64. The Australian dollar fell 0.04% to $0.7030, and the New Zealand dollar strengthened 0.06% to $0.572. The Japanese yen remained relatively stable at 156.920 per dollar. Central bank decisions loom later in the week, with the Federal Reserve, European Central Bank, and Bank of Japan expected to leave rates unchanged, though potential hikes from the Bank of Canada and Reserve Bank of New Zealand remain in play.

Analysts suggest that forward guidance could prove more influential than the actual decisions, as policymakers may shape expectations for future meetings and force a reevaluation of forward rates curves. The Thai baht weakened against the US dollar on Thursday, while gold slipped slightly, trading at $3,986.16 per ounce, and cryptocurrencies saw declines, with bitcoin down 0.6% to $79,925.84 and ether off 1.1% at $2,317.33.