The US dollar’s weakness extends into Thursday as an improvement in risk sentiment among investors drive them towards commodity currencies even as the optimism about Fed’s monetary tightening fades. At the time of writing, the US dollar index DXY is trading at around 93.50.

The Canadian dollar has surged to the highest levels seen in four months against the greenback, powered by the surge in crude oil prices even as Canada’s inflation came in stronger than expected during the previous session. Meanwhile, other leading commodity currencies AUD and NZD have also soared to multi-month highs against the USD, powered by a return of risk appetite in global financial markets.

Another big gainer in the forex market is the Sterling, which is trading at the highest levels seen in more than a month against the US dollar. GBP/USD has been trading bullish since the beginning of this week ever since BOE Governor Andrew Bailey hinted on a possible rate hike soon to offset the effects of high inflation on the British economy.

Meanwhile, safe haven currency Japanese yen has weakened to trade close to the lowest levels in four years against the greenback. The JPY is feeling higher pressure over worries that Japan’s trade deficit could increase further on account of soaring oil prices driving up imports even as uncertainties cloud its exports.

So far this week, the dollar index has dipped by 0.3% and more weakness is expected as more countries raise concerns about persistently high inflation clouding their economic outlook. This has increased expectations that other central banks are also gearing up to start tightening their monetary policies, causing the US dollar to lose some of its recent gains.