Dollar bounces higher as traders brace for inflation data

Monday,   12-Apr-2021   03:23 PM (IST)

The dollar gained ground on Monday after last week’s drop as traders assessed the outlook for Treasury yields, while awaiting crucial U.S. inflation and retail sales data in coming days. Elsewhere it was a quiet start to a data-heavy week for foreign exchange markets. The euro dipped back below $1.19 while the British pound briefly fell to a two-month low, with some analysts citing blood clot concerns around AstraZeneca’s COVID-19 vaccine, which the UK has relied heavily on for its aggressive vaccination programme. The dollar’s fortunes have been tied to the performance of Treasury yields for most of 2021, after concerns about rising inflation in the United States and a stimulus-fuelled economic rebound triggered a significant jump in yields on U.S. government bonds in February. A fall in U.S. yields last week triggered the worst week for the dollar in 2021, but the currency found some stability on Monday. Federal Reserve Chairman Jerome Powell said in a U.S. media interview released on Sunday that the U.S. economy was at “an inflection point” and looked set for a strong rebound in the coming months, but he also warned of risks stemming from a hasty reopening. Investors are now waiting for U.S. March inflation data due on Tuesday. The benchmark 10-year Treasury yield was at 1.6462% after dropping to as low as 1.6170% last week. It had surged to a more than a one-year high of 1.7760% on March 30. The dollar index, which measures the greenback against a basket of currencies, rose 0.1% to 92.275 while the euro dropped 0.2% to $1.1875. Bitcoin traded above $60,000, closing the gap to its record high. Against the pound the dollar initially gained before reversing course. The British currency was last up 0.2% at $1.3734 after briefly touching a two-month low of $1.3669. The dollar fell 0.2% to 109.41 yen versus the Japanese currency.