Dollar slides on improving European, UK economic outlooks, commodities bounce
The U.S. dollar resumed its slide on Monday and reached multi-year lows against the British pound and the Australian dollar as traders focused on the promise of coronavirus vaccinations and the outlooks for economic growth and inflation that could push bond yields higher.
The U.S. dollar index was last down 0.3% in afternoon trading in New York at 90.046 and about even for the year. The dollar has been trending down in February and has now given up about all of its January recovery from a 2020 decline of nearly 7%.
The dollar’s latest retreat comes with spreading belief that the U.S. will go farther than necessary to support the economy with government spending and easy money policies and end up with too much inflation and too much additional debt.
Looking for any sign that the U.S. Federal Reserve might become less dovish and more mindful of inflation, markets will be watching testimony on Tuesday from Federal Reserve Chair Jerome Powell to the Senate Banking Committee.
The dollar’s downtrend has come as the benchmark yield on 10-year Treasury notes has climbed to 1.37% from 1.1% at end of January. The 10-year yield was relatively steady in trading on Monday in advance of Powell’s testimony, which will go into a second day on Wednesday before another committee.
The euro rose 0.4% against the dollar to $1.2162. Data on Monday showed German business morale rose more than expected in February due notably to the country’s resilient industrial sector.
Exchange rates between the euro and dollar will depend “on whether the U.S. economy really will be able to achieve a stronger post-lockdown boom than Europe,” Commerzbank analyst Ulrich Leuchtmann said.
The British pound was last up 0.5% to $1.4066 and the highest levels since April 2018 as Prime Minister Boris Johnson announced a path out of lockdowns on the UK’s relative success providing COVID-19 vaccinations.
Bitcoin drops after climbing to all-time high
Bitcoin fell 6% on Monday to $53,866 after surging to a record high of $58,354 a day earlier.
Bitcoin fell on Monday after surging to its latest record high a day earlier as a sell-off in global equities curbed risk appetite, with some investors also citing concerns about the rapid rise in the price of the virtual currency.
The most popular cryptocurrency fell to $47,400, a one-week low. At one point, it lost nearly 17% of its value, or about $160 billion of its total market capitalization.
Bitcoin recouped some of the losses later in the trading session and was last down around 5.5% at $54,322, on track for its worst day since Jan 27. Its market cap was just under $1 trillion on Monday.
Reference: Reuters, CNBC
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