TOKYO (Reuters) – The dollar extended its setback of nearly three-year lows to major peers Thursday, backed by higher U.S. yields, as President-elect Joe Biden was willing to set out his plans for a massive fiscal stimulus.
The dollar index gained gains in early Asian trading on Wednesday as investors continued to place clumsy bets. 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.
Bitcoin also posted a 10% gain on Wednesday as it recovered after dropping nearly $ 12,000 from an overall high of $ 42,000 last week.
Biden will give details on Thursday on a plan for ‘trillions’ of dollars in pandemic relief. The 10-year Treasury yield increased after CNN reported that the package would amount to about $ 2 billion, supporting the dollar.
However, many analysts expect the denial of the currency to be temporary as the build-up of bearish dollar positions is shaken out.
In the longer term, they expect more U.S. stimulus to support risk sentiment, with the weight on the greenback, which is traditionally considered a safe haven.
“I think positioning in risk assets is becoming a concern so that the dollar could squeeze in the short term,” said Shusuke Yamada, Japan’s chief FX strategist at Bank of America in Tokyo.
‘I focus on gradual dollar weakness in 2021.’
FX speculators have been just below the dollar since mid-March, as investors’ rising appetite for riskier assets has hurt greenback demand.
The dollar index added 0.1% to 90,431 after hitting 0.3% overnight. It fell as low as 89,206 on January 6 for the first time since March 2018.
The euro slipped 0.1% to $ 1.21405 after slipping 0.4% on Wednesday.
The greenback rose 0.2% to 104.075 yen, which had previously contributed a 0.1% increase.
Bitcoin changed little on Thursday at $ 37,420, from $ 30,261.13 on January 11th.
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.
“The rapid sell-off we have seen recently, much of it driven by futures markets,” where positions were over-expanded and the resulting margin calls put the bitcoin price down, said Tokyo chief operating officer Seth Melamed. of currency exchange Liquid.
“In the coal markets, you only see this consistent blow of buying.”
Reporting by Kevin Buckland; Edited by Ana Nicolaci da Costa and Simon Cameron-Moore