LONDON (Reuters] – On Thursday, the dollar dropped as U.S. Treasury yields paused. However, commodity-linked currencies such Canadian and Australian dollars gained as a result of rising commodity prices as well as optimism regarding global economic growth.

After suffering the worst day in a month, sterling and euro gained some ground.

Euro single currency last traded at $1.1368. That’s 0.2% higher than the previous day. At $1.3636, the Pound was 0.2% lower and at 114.33 USD it was unaffected.

This leaves the at 95.428 which is 0.2% lower than in the last session.

Although the dollar rallied during recent sessions, it is not performing as well as anticipated given dramatic increases in the expectations that the U.S. Federal Reserve will begin increasing interest rates in March to reduce inflation.

U.S. The yields on benchmark 10-year notes were at 1.8469%, compared to their 2.902% peak reached Wednesday morning.

These gains are due to traders preparing for an increase in the pace of US monetary policy tightening. Futures on Fed Funds fully price in an increase in the Fed funds rate in March, and four more for 2022.

The and were supported by higher commodity prices, as well as expectations for tighter government.

The Aussie strengthened 0.3%. This was an extension of gains from the previous day.

Analysts believe that the Aussie was being helped by a solid Australian labour market.

Lee Hardman, MUFG analyst said that “the latest Australian employment report has provided additional clear evidence of tightening labour market conditions and reinforced expectations that RBA (Reserve Bank of Australia), will decide to immediately end the QE [quantitative easing] program at their next policy conference on February 1st.”

Hardman pointed out that the Canadian currency has performed the best in the G10 currencies in 2022. He attributed this to an increase in oil prices, which are at seven-year highs. There is also speculation that the Bank of Canada may soon raise rates.

Also, the Norwegian Crown, another currency that is linked to oil price, performed very well. The crown grew 0.2% in comparison with the dollar as well.

“Overnight commodity price movements were the main driver of commodity currencies,” stated Kim Mundy (OTC), senior economist and currency strategist, Commonwealth Bank of Australia.