The U.S. dollar rebounded Friday but remained in line for a huge weekly loss against major rivals following the Federal Reserve's decision this week to massively pump up the supply of dollars in a bid to jumpstart the economy and avert a deflationary spiral.
Commodity currencies, as well as the euro, are among the week's biggest beneficiaries after investors and traders rushed into gold and other commodities following the Fed's decision to begin aggressively purchasing Treasury bonds and other debt.
The Norwegian krone has been among the top performers in the wake of the Fed move, with a total gain of 7.7% versus the dollar, wrote strategists at Lloyds TSB.
The Norwegian krone dipped 0.3% Friday to trade at 6.348 per dollar, but began the week near 6.840.
Meanwhile, the euro appears to have regained a tight relationship with movements in the gold price after European Union finance ministers gave a cold shoulder to U.S. calls for increased stimulus spending, noted Simon Derrick, chief currency strategist at Bank of New York Mellon.
Since March 9, the euro had rallied around 7.9% versus the dollar, compared to a 7.4% rise in the price of gold over the same period, he said, in a research note.
"Given that the volatility of the gold price typically runs at over twice that of [the euro/U.S. dollar currency pair], this is real testament to the single currency's changing status," Derrick said. "It appears that once again the euro really is as good as gold."
The euro traded at $1.3579 versus the dollar in recent action, down from $1.3671 late Thursday.
The single currency drifted lower after the statistical agency Eurostat reported a 3.5% monthly fall in euro-zone January industrial output, for a 17.3% fall from the same month last year. Both measures were the largest declines since records began in 1990.
"With global demand still at very depressed levels, companies are reluctant to resume production plans even though inventories are judged less heavy than at end-2008," wrote Tullia Bucco, an economist at UniCredit MIB, in a research note. "We currently expect [gross domestic product] to shrink 1.7%" quarter-on-quarter in the first three months of 2009.
The dollar index , a measure of the greenback against a basket of major currencies, traded at 83.233, up from 83.113 in late North American trading Thursday.
The index began the week above the 87.00 level.
The dollar rose versus the Japanese currency to 95.35 yen, up from 94.48 yen.
The British pound fell to $1.4447 versus the dollar from $1.4516 late Thursday.
