What hit dollar?

Dollar has taken a hit this week so far, and yesterday the move exacerbated post ECB press conference. There was not much in ECB press conference yesterday, other than as Mr. Draghi suggested that the program depends on change in inflation scenario, though there is no hard and fast number. All in all as of now ECB governing council member are intending to continue the current program at least till September next year.

• At one point, this week dollar was down close to 2% from Monday's high. Dollar index is now trading at 98.5.

Naturally question comes what hit the dollar so hard?

Variety of factors are now in play, which might explain the dollar move.

• Psychological level - Dollar index, which is a measure of dollar value against a basket of currencies, facing tough resistance near 100 mark from which it was thrown back towards 96 level by dovish comments and projections of FOMC participants last month.
  
• Treasury yields - US 2 year yield has now softened to 0.50%, down 23 basis points from peak. Lower yield would attract less real money from pension and sovereign funds to keep the dollar popped up. Similarly 5 year and 10 year yield continue to soften which now stands 1.32% and 1.89%.
  
• Commodity prices - Higher commodity prices namely oil is exerting pressure on dollar. Though this effect might be temporary it is undoubtedly exerting pressure on dollar for now.
  
• Loonie and Aussie - larger bids to buy Aussie and Loonie is hitting dollar bulls as a whole. Canadian dollar has broken an important level as both countries' central banks kept benchmark unchanged. Improved Job report have helped Aussie to gain against green buck.
  
  
• Yield differential - Yield differential has been fueling Dollar move, however with falling treasury yield dollar yield differential is now too much dependent on European counterparts for move. European yields continuing fall, however sudden bounce back could derail dollar big time.
  
• Weak economic releases - Last night Empire state manufacturing dropped to -1.19 from 6.90 prior along with fall in Industrial production by -0.6% in March. Weaker dockets posing doubts over economic acceleration in US.

Nevertheless Dollar looks to be solid ground from a medium and long term perspective, short could be bumpy.