TOKYO- The dollar held four days of gains against major peers on Tuesday as the prospect of massive fiscal stimulus pushed US yields higher.
President-elect Joe Biden, who takes office on Jan. 20 with his Democratic party in control of both Houses, has promised “trillions” in extra pandemic-relief spending.
The dollar index has rebounded from a nearly three-year low reached last week as the benchmark 10-year US Treasury yield topped 1 percent for the first time since March and rose as high as 1.148 percent overnight.
The support from rising yields has so far trumped worries that the extra spending could trigger faster inflation, which ordinarily would make the greenback less attractive.
Many analysts expect the US currency to resume the decline that saw the dollar index lose close to 7 percent in 2020 amid better risk sentiment stimulus spending and vaccine rollouts brighten the global economic outlook.
“It’s complicated because higher US yields are giving the dollar a bounce, but stimulus could support US equities, and the dollar would remain weak,” said Osamu Takashima, head of G10 FX strategy at Citigroup Global Markets Japan in Tokyo.