11:44 AM EDT, 04/19/2024 (MT Newswires) -- The Swedish krona (USD/SEK) and Swiss franc (USD/CHF) led a European currency rebound that pulled the US dollar lower against many major currencies early in the North American session on Friday as market concerns over developments in the Middle East appeared to dissipate.

The dollar was the third worst performing currency in the G10 basket having risen against only the New Zealand dollar and pound sterling, though it also gave up ground to all G20 counterparts except the onshore Chinese renminbi and Mexican peso. Previously, the greenback had risen against all G20 currencies except for the Swiss franc and Japanese yen on safe-haven demand following Israel's overnight retaliation against Iran for its earlier missile and drone attack.

Meanwhile, many stock indices reversed prior losses to notch up intraday gains while government bond yields rose from session lows to trade higher as the North American session got underway and as risk aversion among investors dissipated.

Flows shifted in favor of risky assets despite a dearth of economic data while many analysts attributed the price action to Iranian media reports suggesting Tehran might be unlikely to retaliate further against Israel.

A quick summary of foreign exchange activity heading into the US lunch hour:

EUR/USD was 0.21% higher at 1.0665, making it one of the better performers in the G10 group, after recovering sharply from overnight lows around 1.0610. Europe's single currency appeared to be helped in its recovery when the German Producer Price Index rose 0.2% for the month of March, up from -0.4% previously and ahead of the consensus for a 0% reading.

Meanwhile, European Central Bank President Christine Lagarde said nothing to upset the market when addressing the International Monetary and Financial Committee in Washington, and dovish remarks from Governing Council member Edward Scicluna did nothing to deter appetite for the euro. Scicluna told CNBC News the ECB should consider cutting interest rates by 50 basis points in June if inflation surprises further on the downside of expectations, or if the ECB's forecasts for inflation are cut further at the next meeting.

Elsewhere in Europe GBP/USD fell 0.18% to 1.2412 to leave Sterling as the worst performer in the G10 basket, although the pair was up from overnight lows around 1.2389. Sterling's underperformance was persistent following the release of lower-than-expected UK retail sales figures for March and some dovish commentary from Bank of England Deputy Governor Dave Ramsden.

Retail sales growth was flat in March following an upwardly-revised 0.1% increase in February, though consensus had been for a 0.3% rise in March. Meanwhile, the BoE's Ramsden told the Peterson Institute of International Economics that the threat of UK inflation persisting at an above-target level has receded and that risks to the inflation outlook are now on the downside.

USD/JPY, meanwhile, was trading 0.06% lower at 154.53 after recovering from an overnight low of 153.58. Previously, the Japanese yen overlooked a Ministry of Economy, Trade and Industry report suggesting tertiary industry activity rose 1.5% in February, an improvement on the 0.5% fall in January and ahead of the consensus for a 0.4% increase.

The Japanese currency also got no help previously on Wednesday when finance ministers of Japan, South Korea and the US released a joint statement expressing concern about recently sharp losses of the yen and won. The South Korean won, on the other hand, was the best performing currency in the G20 basket on Thursday.

USD/CAD, meanwhile, was trading 0.14% lower at 1.3745 after being quoted as high as 1.38 in the overnight session. Friday's price action placed the Canadian dollar in the upper half of the G10 rankings and came amid a dearth of local economic data.