TOKYO- The dollar hovered near a two-month peak against a basket of currencies on Monday, as doubts about recovery persisted ahead of a barrage of economic data and political developments in the United States.
While a rebound in US stocks on Friday has helped to curb the ascent of the dollar, deemed as a safe-haven, signs of slowdown in the nascent recovery from the pandemic and political uncertainties have kept investors on guard.
The dollar index stood little changed at 94.530. It hit a two-month high of 94.745 last week and posted its biggest weekly rise since early April.
The euro changed hands at $1.1635, having dropped to $1.16125 on Friday, its lowest in two months.
The British pound stood at $1.2767, slightly above Wednesday’s two-month low of $1.2676.
“The dollar’s rise reflects unwinding of (dollar short) positions. There were two main drivers, rise in real US yields and risk-off trades,” said Tatsuya Chiba, manager of forex trading at Mitsubishi UFJ Trust Bank.
The yield on US inflation-linked bonds, known as real yields, have risen almost 20 basis points after touching a record low earlier this month.
On the whole, higher yields, real or nominal, tend to support a currency. Traders have noted there has been a particularly strong correlation between the US real yield and the dollar over the last few months.