By Stefano Rebaudo

(Reuters) – The euro edged higher Friday but fears about a slowdown in the economy held it within a narrow range. Meanwhile, the dollar fell as investors anticipated tighter monetary policy from the Federal Reserve.

“The combination of lingering Russia-related risks, high energy prices and Fed-ECB policy divergence still points to a weaker, rather than stronger, ,” ING analysts said.

“EUR-USD remains quite stuck at around 1.10, with better-than-expected PMI surveys across the eurozone for March not sufficient to induce buying interest,” Unicredit (MI:) analysts said in a research note.

A survey on Friday showed that German businesses suffered from deterioration in March because of worsening supply chains issues due to high petrol prices, driver shortages and increasing fuel costs.

1.1% increase in the single currency to $1.1016

Derek Halpenny, head of global research markets at MUFG, said in a note to clients that some renewed optimism over the prospect of the end of the conflict in Ukraine “helped improve financial market conditions and weaken the U.S. dollar.”

Volodymyr Zelesky, the President, said that Ukraine must “achieve peace” to end Russian bombardment.

The greenback against six peer currencies, measured by the, was 0.1% lower at 98.631

BofA analysts highlighted that markets were priced in for the Fed’s next move even before the Fed started, and much faster than the tightening cycles between 2015-2018.

Markets are placing bets on Fed rate rises of 190 bps per year, which includes a 80% chance for a 50 basis point increase in May. [IRPR]

Japan’s yen staged a rebound versus the greenback, up 0.6%, after hitting a fresh low since December 2015 overnight on the difference in rate hike expectations between the Bank of Japan and other major central banks.

Analysts noted that Bank of Japan’s (BOJ) signal was bullish as it resisted entering the market Friday morning even though the yield on the 10-year Treasury bond rose to a level higher than where the central banks had previously offered to purchase unlimited amounts in February.

Governor Haruhikokuroda however clarified that the weakening yen is good for the economy.

“We don’t expect a significant further depreciation of the yen versus the dollar. We think that at 115, it is fairly valued considering the Japanese central bank’s dovish stance,” Roman Ziruk, market analyst at Ebury, said.

After rising on the previous day, the Norwegian crown fell 0.2% against the euro. This was because the central bank raised the benchmark rate. It also stated that it plans to increase its interest rates at a quicker pace.