Dollar gains as investors bet on strong U.S. recovery
The dollar advanced against major currencies on Tuesday, climbing to a one-year high versus the yen, as increasing U.S. vaccinations and a major stimulus package backed expectations of a strong recovery from the pandemic, lifting Treasury yields.
Benchmark 10-year Treasury yields rose to 14-month highs on Tuesday at 1.776% before pulling back later in the session.
Treasury yields hit new highs a day before President Joe Biden is set to outline how he intends to pay for a $3 trillion to $4 trillion infrastructure plan.
The dollar index rose above the 93 mark and was last up 0.4% at 93.29. It hit a high of 93.357, its highest level in four months.
The dollar index has risen in five of the last six sessions.
Tuesday’s U.S. data further supported the upbeat outlook on the world’s largest economy. Reports showed that U.S. consumer confidence climbed in March to its highest level since the start of the COVID-19 pandemic, while housing prices soared year-on-year in January.
The safe-haven dollar also found some support as investors digested the fallout from the collapse of highly leveraged investment fund Archegos Capital.
The greenback also rose above 110 yen, a level not seen since March last year, and was last up 0.5% on the day at 110.35 yen. The greenback was on track for its best month since late 2016.
The euro, meanwhile, weakened to $1.1711, its lowest level since early November. It was last down about 0.4% to $1.172.
Tougher coronavirus curbs in France and Germany dimmed the short-term outlook for the European economy. A widening spread between U.S. and German bond yields is adding pressure on the euro.
The spread between U.S. and German 10-year yields has widened the most since January of last year.
Investors will watch closely the monthly U.S. nonfarm payrolls on Friday, with Federal Reserve policymakers so far citing slack in the labor market for their continued lower-for-longer stance on interest rates.
Reference: CNBC
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