TOKYO (Reuters) – The dollar maintained a four-day gain against major peers on Tuesday as a major fiscal stimulus was expected to push U.S. output higher.
President Joe Biden, who will take office on January 20 with his ruling Democratic Party, has pledged “trillions” in further pandemic relief spending.
The dollar index has rebounded from a nearly three-year low reached last week as the U.S. Treasury’s 10-year benchmark yield rose 1% for the first time since March and has risen as high as 1.148% overnight.
The support from a rise in output so far has raised concerns that the extra spending would raise debt levels and trigger faster inflation, which would normally make the greenback so attractive.
Many analysts expect the U.S. currency to begin the decline that the dollar index has seen near 7% in 2020 as extended stimulus and vaccine spreads clarify the global economic outlook. Investors tend to buy the dollar when looking for safer investments.
The dollar index remained unchanged at 90.578 in Asian trading, after rising as high as 90.73 overnight for the first time since December 21. It fell to 89.206 on January 6, a level not seen since March 2018.
“It’s complicated by the fact that higher U.S. yields are kicking the dollar, but a stimulus could support U.S. equities, and the dollar would remain weak,” said Osamu Takashima, head of strategy. G10 FX at Citigroup Global Markets Japan in Tokyo.
“In the medium term, we remain bearish on the dollar. Dollar funds look expensive. ”
Speculators in the FX market are very bearish on the dollar, U.S. Commodity Futures Trading Commission data showed on Friday.
The greenback rose 0.1% to 104.305 yen, after rising to a one-month high of 104.40 on Monday.
The euro remained broadly stable at $ 1.21425 after slipping to $ 1.21320 in the previous session for the first time since December 21.
Money markets have largely strayed from a Democratic attempt to persuade President Donald Trump following last week’s Capitol siege.
“We do not expect the U.S. political theater to be a major driver of the USD,” Commonwealth Bank of Australia currency analyst Joe Capurso wrote in a news release.
“Market participants are looking at Biden’s presidential policies rather than the days of Trump’s presidential death.”
“Given the USD’s slight valuation, we expect the recent rise in the USD to be limited,” he said.
Meanwhile, China’s yuan went up against the dollar on demand ahead of next month’s New Year’s holiday.
Yuan spot opened on land at 6.4770 per dollar and changed hands at 6.4712 at noon, 81 pips stronger than last late session.
Bitcoin was trading at $ 35,186 as its red-hot rally has fallen since going up to a high of $ 42,000 on Jan. 8.
Reciting with Kevin Buckland; Edited by Sam Holmes and Ana Nicolaci da Costa