LONDON (Reuters) – The dollar rose higher on Tuesday, helped by a rise in U.S. treasury yields, but remained close to three-week lows as markets waited for inflation data in the United States.
The dollar has fallen so far in April after rising in the first three months of 2021 on expectations that a combination of monetary stimulus and government spending would drive inflation up.
US CPI data for March is available at 1330 GMT and is expected to show a rise in inflation to 2.4%.
Market participants will also notice how returns respond to a 30-year Treasury auction.
ING strategists wrote in a comment to clients that higher inflation will support higher US yields, which in turn could cause the dollar to outperform lower yields such as the yen, Swiss franc and euro.
The inflation data “should further fuel the rumor that the US economy is starting to overheat and is likely to raise concerns that the Fed’s solid pigeon message will be increasingly challenged,” ING said.
At 0725 GMT, the dollar was up 92% against a basket of currencies at 92,201, which is away from recent lows of three weeks.
The US Treasury yield for ten years was 1.6979% for its third consecutive profit day, but still below the level of 1.7760% on March 30, which was the highest in more than a year.
“There is a general expectation that inflation will rise in the coming months, but it is also generally agreed that this will be a short-lived phenomenon,” Deutsche Bank strategist Jim Reid wrote in a note.
Data overnight showed that China’s exports rose in March, with import growth rising to four-year highs, indicating an improvement in global demand.
Asian stock markets were generally positive after the data, but the boost did little to support foreign exchange markets. By early London trading, China’s foreign yuan fell 0.1% against the dollar, changing to 6.55523.
The euro fell 0.1% to $ 1.1895. Germany’s ZEW survey of investors’ economic sentiment for April should take place by 1000 GMT.
The Australian dollar, seen as a liquid proxy for risk appetite, fell 0.2% against the US dollar at 0.7609.
On Monday, Australia abandoned its goal of vaccinating almost all of its population by 2021.
The New Zealand dollar also fell, 0.1% lower. The Reserve Bank of New Zealand will meet on Wednesday and is expected to keep rates constant.
The British pound rose 0.1% against the dollar at $ 1.3763. The UK economy grew in February as companies prepared for the removal of the third coronavirus virus closure, gross domestic product data showed.
Elsewhere, bitcoin rose 1.6% to $ 60,807.77, ahead of Coinbase Global Inc, the largest U.S. cryptocurrency exchange listed on the Nasdaq on Wednesday.
Reporting by Elizabeth Howcroft, Editing by Larry King