LONDON (Reuters) – The dollar rose lower than its three-year low against major peers on Thursday as expectations for President-elect Joe Biden’s fiscal stimulus boosted US government bond yields.
The 10-year Treasury yield rose after CNN reported that the stimulus would amount to about $ 2 billion, which would contribute to the dollar’s support.
In the early European morning trading, the dollar index changed little, by 0.04% at 90,320, as investors waited for Biden to detail later today a plan for ‘trillions’ of dollars in pandemic relief.
The dollar has risen in four of the past five trading sessions as the outlook for more stimulus outweighs U.S. government bonds, pushing the standard treasury yield above 1% for the first time since March.
Expectations are already high for the stimulus, but many analysts believe that the spending pressure has already been priced in.
“We feel that the fiscal cat is already out of pocket: it will cost a lot to surprise markets after the repricing seen last week,” said ING analysts. “The scope for the reflection trade to start only at the back of this announcement is limited.”
In addition, the currency’s recent recovery is threatened by a build-up of bearish dollar positions.
FX speculators have been just below the dollar since mid-March, as investors’ rising appetite for riskier assets has hurt greenback demand.
Since the U.S. stimulus supports risk sentiment, it could weigh the dollar, which is considered a safe haven.
The euro slipped 0.05% to $ 1,214 after slipping 0.4% on Wednesday.
The dollar rose 0.13% to 104.02 yen.
Bitcoin posted a 10% gain on Wednesday after dropping nearly $ 12,000 from last week’s record high of $ 42,000. It rose 3% to $ 38,860 on Thursday, from as low as $ 30,261.13 on Jan. 11.
Interest in the cryptocurrency rose as institutional investors began buying heavily, viewing it as an inflation hedge and exposed to gains if adopted more widely.
Reporting by Kevin Buckland; Edited by Ana Nicolaci da Costa, Simon Cameron-Moore, Larry King