TOKYO- The US dollar rose on Wednesday, clawing back some of the losses sustained overnight, as US yields found a floor following their drop from one-year highs.
Riskier currencies including the Australian and New Zealand dollars retreated following big gains on Tuesday. Bitcoin turned lower after earlier topping $55,000 for the first time since Feb. 22.
The safe-haven dollar has closely tracked a surge in Treasury yields in recent weeks, both because higher yields increase the currency’s appeal and as the bond rout shook investor confidence, spurring demand for the safest assets.
The benchmark 10-year Treasury yield stabilized around 1.54 percent on Wednesday in Asia after a three-day drop from a one-year high of 1.6250 percent.
The dollar index =USD strengthened about 0.2 percent to 92.137 in Asia on Wednesday, after falling back sharply from a 3-1/2-month high of 92.506 overnight.
Bond investors have been selling on bets that a faster-than-expected economic rebound would spark a surge in inflation, with President Joe Biden expected to sign a $1.9 trillion coronavirus aid package as soon as this week.
Many analysts still expect the dollar to weaken over the course of this year, but the speed of recent gains has forced some to adjust their views.
Westpac, which as recently as last week was talking about selling the dollar index into 91, now sees it reaching as high as 94.50 before resuming last year’s downtrend as the rest of the world closes the gap with the US’s pandemic recovery.
“Global reflation is alive and well, and Europe will get her vaccination act together at some point too,” Westpac strategists wrote in a note Wednesday.
“A continuation of the global recovery … should see commodity currencies outperform.”
The Aussie dropped 0.4 percent to $0.7684 after jumping 1 percent overnight.
New Zealand’s kiwi slipped 0.4 percent to $0.7146 following Tuesday’s 0.8 percent increase.
The euro was 0.2 percent lower at $1.18810 after bouncing off a 3 1/2-month low of $1.18355 on Tuesday. – Reuters