The dollar hit two-week highs on ‍Thursday as fresh volatility gripped stocks and stormed ahead against the pound, which dropped after the Bank of England left UK rates ​unchanged in a razor-thin vote.

Next up on Thursday is the European Central Bank's policy meeting, which is also expected to deliver no change in interest rates.

The dollar index, which ⁠measures the U.S. currency against a basket of six others, was last up 0.15% at 97.82, rising for a second day.

"There’s a bit of risk aversion coming through," said ⁠Sim Moh ‌Siong, currency strategist at OCBC in Singapore. "When there's risk aversion, the dollar tends to strengthen." The dollar has regained some strength this week and stocks have turned risk-off as financial markets assess U.S. corporate earnings season, now halfway complete.

Gold and silver, which have become more volatile ⁠as a result of leveraged buying and speculative flows, were rocked by a fresh selloff on Thursday, which saw silver falling as much as 16.6% to a low of $73.41. The Nasdaq Composite has fallen 2.9% over the past two days, its biggest slide since October, with volatility triggered by market bellwethers including Google parent Alphabet, which reported aggressive spending plans on Wednesday, and a rout in software stocks as they adapt to a new era of generative AI.

CLOSE CALL ⁠FROM BANK OF ENGLAND

Sterling dropped as much as ​0.7% on the day against both the dollar and the euro after the BoE left borrowing costs unchanged in a 5-4 split among the nine policymakers that make up the central bank's rate-setting ‍committee. The pound was last down 0.6% at $1.3574, having been under intense pressure all day from concern about the stability of the UK government and whether Prime Minister Keir Starmer could survive the fallout from his ​decision to appoint Peter Mandelson as U.S. ambassador despite knowing about his ties to Jeffrey Epstein.

"We've got twin problems for sterling today, obviously, with more rate cuts being priced and all the political risks. Normally, you would play certainly the political risk via cable, but I think ultimately, probably euro/sterling is the better way to play (the rate outlook)," CIBC head of G10 FX strategy Jeremy Stretch said.

"So I would prefer to be long of euro/sterling. We had been down below the 200-day moving average prior to today. We're back above it, and I think that threshold is going to be left well behind," he said, referring to the euro's break above 86.52 pence that left it up 0.5% on the day against the pound at 86.95. The euro was last down 0.2% at $1.1790 ahead of the ECB decision, where it is expected to keep rates on hold. Investors' attention will be focused on the post-policy press conference to gauge the outlook for rates over the coming months.

Right ⁠now, markets show traders are attaching very little chance of a rate cut this year. Even with ‌the volatility that has dominated markets since the start of the year, the euro is only some 0.4% above where it was when the ECB last met in December.

However, the euro is some 13% higher against the dollar than it was a year ago, which has added to some concern among policymakers about the impact ‌on regional price pressures, ⁠while inflation in the euro zone has fallen to around 1.7%, below the ECB's target of 2%.

Cryptocurrencies extended losses, hitting their lowest since November 2024. Bitcoin fell as much ⁠as 4.3% to $69,482. Ether was down 3.4% at $2,055. (Additional reporting by Gregor Stuart Hunter in Singapore; Editing by Sam Holmes, Kirsten Donovan)