TOKYO (Reuters) – The U.S. dollar came safe for nearly four months on Wednesday as there were concerns about a third wave of COVID-19 in Europe, a possible U.S. tax increase and escalating tensions between the West and China reducing risk appetite.
The yen also strengthened and U.S. Treasury plummeted as Wall Street stocks and crude oil fell as investors measured the outlook for global growth.
The dollar index rose to a two-week high of 92.412 early in the Asian session, approaching a four-month high of 92.506 that was hit earlier this month.
The benchmark “looks positive to test the top of a new, higher 91-93 range that we think will be in the coming weeks,” Westpac strategists wrote in the messenger note.
“Expanded European locks have lost confidence in a global reversal; At the same time, the US will see a dramatic recovery in the coming months amid strong vaccine rollout, stimulus payments and economic reopening, ”they said.
The euro plunged into a four-month pool below $ 1.18355 – trading as low as $ 1.18360 – after Germany closed out and urged its citizens to stay at home over the holidays Easter.
Concerns about the speed of diffuse treatment were also heightened after the U.S. health agency said the AstraZeneca Plc vaccine may have leaked outdated information into its data.
The flight to safety got an added nudge when Finance Secretary Janet Yellen told lawyers that future tax increases will be needed to pay for infrastructure projects and other public investments.
Yellen was giving evidence to the House Financial Services Committee along with Federal Reserve Chairman Jerome Powell, who reiterated that a near-term spike in expected inflation will be expected.
That helped fuel U.S. Treasury yields, with the benchmark falling to 1.6048% on Wednesday, continuing to pull back from a year-over-year high of 1.7540%. was discussed last week.
Both Yellen and Powell also plan to testify to the Senate Banking Panel on Wednesday.
Human rights sanctions on China imposed by the United States, Europe and Britain, which prompted retaliatory sanctions from Beijing, are adding to market concerns.
The safe-haven yen was substantially stronger, and the Australian dollar – which was considered a meltdown for risk – weakened later Wednesday.
The Aussie slipped as low as $ 0.75985, a level not seen since early February, and to 82.49 yen for the first time since the beginning of this month.
In cryptocurrencies, bitcoin traded below $ 54,000, less than two weeks since it hit a record high of $ 61,781.83.
Reciting with Kevin Buckland; Edited by Tom Hogue