TOKYO (Reuters) – The dollar bolstered its recovery from nearly three-year lows versus major competitors on Thursday, bolstered by higher US returns as President-elect Joe Biden prepared to outline his plans for massive fiscal stimulus.
The dollar index held on to gains made on Wednesday during early Asian trading as investors continued to settle bearish bets. The dollar has appreciated in four of the past five trading sessions as the prospect of more stimulus measures weighed on US Treasuries, pushing the benchmark Treasury yield above 1% for the first time since March.
Bitcoin also held on to 10% gains from Wednesday, when it rebounded after slashing nearly $ 12,000 from a record high of $ 42,000 last week.
Biden will provide details Thursday of a “trillion” dollar plan to support pandemics. Yields on 10-year Treasury bonds surged after CNN reported that the package will reach about $ 2 trillion, adding support for the dollar.
However, many analysts expect the currency’s rebound to be temporary as a buildup of bearish dollar positions is shaken.
In the longer term, they expect more US stimulus to bolster risk sentiment, weighing on the greenback, which has traditionally been viewed as a safe haven.
“I think positioning in risky assets is becoming a concern, so the dollar could be under pressure in the near term,” said Shusuke Yamada, chief Japan FX strategist at Bank of America in Tokyo.
“I focus on the gradual weakness of the dollar in 2021.”
FX speculators have been net short on the dollar since mid-March as investor growing interest in riskier assets negatively impacted demand for the dollar.
The dollar index added 0.1% to 90,431 after an overnight rise of 0.3%. It dropped to 89,206 for the first time since March 2018 on January 6.
The euro fell 0.1% to $ 1.21405 after falling 0.4% on Wednesday.
The greenback rose 0.2% to 104.075 yen, which previously contributed to a 0.1% gain.
Bitcoin had changed little on Thursday at $ 37,420, up from just $ 30,261.13 on Jan. 11.
Interest in the cryptocurrency has skyrocketed as institutional investors began to buy heavily, seeing it as both an inflation hedge and exposed to gains when applied more widely.
“That steep sell-off we saw recently was driven in large part by the futures markets,” where positions became overloaded and the resulting margin calls put downward pressure on bitcoin price, said Seth Melamed, the Tokyo-based chief. Operating Officer. of cryptocurrency exchange Liquid.
“In the spot markets, you just see this consistent drumbeat of buy.”
Reporting by Kevin Buckland; Edited by Ana Nicolaci da Costa and Simon Cameron-Moore