NEW YORK- The dollar rose following a fresh spike in Treasury yields as the prospect of economies emerging from year-long coronavirus lockdowns reignited inflation fears.
Market participants have grown wary in recent weeks that massive fiscal stimulus and pent-up consumer demand could lead to a jump in inflation as expanding vaccination campaigns bring an end to lockdowns.
Data on Friday showed US producer prices (PPI) had their largest annual gain in nearly 2-1/2 years, though considerable slack in the labor market could make it harder for businesses to pass the higher costs on to consumers.
The US economy is set to get a massive shot in the arm after President Joe Biden signed a $1.9 trillion stimulus bill into law on Thursday and urged US states to make all adults eligible for a coronavirus vaccine by May 1.
A selloff in Treasuries overnight continued into the US session, with the yield on the benchmark 10-year note hitting a fresh one-year high of 1.6420 percent, helped by optimism around US economic prospects.
The dollar was up 0.25 percent at 91.668 against a basket of six major currencies, leaving it on track to end the week slightly lower.
The greenback hit an intraday high of 92.506 when yields surged on Tuesday, which was its strongest since November, but recorded three straight days of losses as yields stabilized.
“Bond yields have been in a very strong uptrend and with the PPI numbers somewhat higher than consensus, that’s contributing to the rise,” said Kathy Lien, managing director at BK Asset Management.