LONDON (Reuters) – The dollar struggled at a one-week low on Tuesday as traders became cautious about the prospect of a setback against the backdrop of a major US fiscal stimulus package.
Investors have been pushing the dollar up over the past few weeks when Democrats ousted the pres. Joe Biden’s $ 1.9 billion COVID-19 relief package is accelerating, but some analysts believe that massive fiscal spending coupled with the Federal Reserve’s continued ultra-easy monetary policy will be a dollar headwind.
“Opinions about the impact the package will have on the U.S. economy differ,” Commerzbank strategists said.
“While the prospect of fiscal support until recently has provoked positive reactions in the markets, the market no longer seems entirely sure about it.”
After an attempt to bounce in the previous session, the dollar generally weakened against its peers as U.S. Treasury yields softened from overnight highs.
The biggest benefit of the weakening dollar was cryptocurrencies with bitcoin rising above $ 48,000, building on an almost 20% increase overnight after Tesla Inc announced a $ 1.5 billion investment in the digital asset has.
The dollar index was 0.3% lower at 90.73 in early London trading, falling to 90.603 for the first time since 1 February.
Disappointing data on U.S. jobs on Friday blew the wind out of a two-week run that raised the dollar to a high of more than two months of 91.6.
The euro rose 0.2% on Tuesday to $ 1.20775, compared to a two-month low of $ 1.9520 that hit Friday.
The British pound has revisited its highs since May 2018, rising to $ 1.3784 in Asia. It last traded 0.3% at $ 1.3774.
Graphic: USD Positions
Reporting by Saikat Chatterjee; Edited by Kirsten Donovan