Dollar Up, But Still Feels Impact of Recent Treasury Yields Decline

Dollar Up, But Still Feels Impact of Recent Treasury Yields Decline – The dollar was up on Monday morning in Asia but remained near two-and-a-half-year lows thanks to the previous week’s decline in U.S. Treasury yields.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.11% to 92.257 by 12:05 PM/AM ET (4:05 AM GMT).

The USD/JPY pair inched down 0.10% to 109.55.

The AUD/USD pair edged down 0.178% to 0.7607 while the NZD/USD pair inched up 0.04% to 0.7032.

The USD/CNY inched up 0.04% to 6.5547 while the GBP/USD pair edged down 0.12% to 1.3691.

The benchmark 10-year Treasury yield was at 1.6745% on Monday after dropping as low as 1.6170% during the previous week. Investors also await the three, 10 and 30-year Treasuries auctions that will take place later in the day.

Both the dollar and bond yields climbed down from their multi-month peaks reached in March, with the accelerating U.S. economic recovery fueling bets of runaway inflation.

The U.S. Federal Reserve has sought to calm these fears, insisting that any near-term price pressures are transitory. Fed Chairman Jerome Powell said that the U.S. economy is at an “inflection point” with expectations that growth and hiring will pick up speed in the months ahead in an interview on Saturday, but also warned of risks stemming from a hasty reopening. Powell will also speak on Wednesday at the Economic Club of Washington.

“Key for the near-term outlook will be whether yields continue to consolidate around these levels, or march higher,” which would support the dollar, National Australia Bank (OTC:NABZY) strategist Tapas Strickland said in a note.

However, the note also struck a more positive tone, saying that “the broader thematic of a rapid rebound in the U.S. economy on the back of an impressive COVID-19 vaccine rollout continues,” the note added.

On the data front, Friday’s U.S. producer price index recorded its largest annual gain in nine-and-a-half years, giving the dollar a boost.

“The dollar has some upside potential this week… strong U.S. economic data will highlight the divergence between the U.S.’s fast economic recovery and the more stunted recoveries in other developed economies,” Commonwealth Bank of Australia (OTC:CMWAY) strategist Kimberley Mundy said in her own note.

More U.S. data will be released during the week, including the consumer price index on Tuesday, the Fed’s Beige Book on Wednesday, and retail sales as well as industrial production data on Thursday.

The dollar can lift back toward 110 yen, while the euro has scope to retrace most of that recent gains from its almost five-month low near $1.17, Mundy’ note added.

In cryptocurrencies, bitcoin edged closer towards the record peak of $61,781.83 it hit a month ago, trading near the $60,000 mark after rising as high as $61,222.22 over the weekend.

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