TOKYO- The dollar languished near 2-1/2-week lows against major peers on Monday as a decline in Treasury yields restrained the US currency.
Both the greenback and bond yields are taking something of a breather after scaling multi-month peaks at the end of last month, powered by bets that an accelerating US recovery from the pandemic will lift inflation faster than Federal Reserve policymakers anticipate.
While the Fed’s repeated insistence that near-term price pressures will prove transitory has somewhat soothed investors, the dollar firmed on Friday following stronger-than-expected producer price data, taking the edge off the currency’s worst week this year.
The dollar index, which tracks the greenback against a basket of six rivals, was little changed at 92.193 early in the Asian session, following a 0.9 percent slump last week. It dipped below 92 on Thursday for the first time since March 23.
The benchmark 10-year Treasury yield was at 1.6745 percent after dropping as low as 1.6170 percent last week. It had surged to a more than one-year high of 1.7760 percent on March 30.
“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 strategist Tapas Strickland wrote in a client note.
“The broader thematic of a rapid rebound in the US economy on the back of an impressive vaccine rollout continues.”
Data on Friday showed the largest annual gain in 9-1/2 years for US producer prices, backing expectations for higher inflation as the economy reopens amid an improved public health environment and massive government funding.
