LONDON (Reuters) – The dollar rose slightly higher on Tuesday, helped by a rebound in US Treasury yields, but was still near the three-week low as markets waited for US inflation data.
The dollar has fallen so far in April, following an increase in the first three months of 2021 on the expectation that a combination of monetary stimulus and government spending would drive inflation.
US CPI data for March is scheduled for 1330 GMT and is expected to show an increase in inflation to 2.4%.
Market participants will also pay attention to how returns respond to a 30-year Treasury auction.
ING strategists wrote in a note to customers that higher inflation would support higher US interest rates, which in turn could cause the dollar to outperform lower interest currencies such as the yen, Swiss franc and the dollar. euro.
The inflation data “should fuel the narrative that the US economy is starting to overheat and are likely to add to concerns that the Fed’s very moderate message will be increasingly challenged,” ING said.
At 0725 GMT, the dollar was up 0.1% against a basket of currency, at 92.201, away from the recent three-week lows.
The 10-year yield on US Treasuries was 1.6979% for the third consecutive day of gains, but still well below the 1.7760% level reached on March 30, the highest level in more than a year.
“There is a widespread expectation that inflation will increase in the coming months, but there is also a strong consensus that this will be a temporary phenomenon,” Deutsche Bank strategist Jim Reid wrote in a note.
Overnight data showed China’s exports surged in March, with import growth rising to its highest level in four years, indicating an improvement in global demand.
Asian stock markets were generally positive after the numbers, but the boost did not help currency markets well. At the start of trading in London, the Chinese offshore yuan fell 0.1% against the dollar, changing hands at 6.5523.
The euro fell 0.1% to $ 1.1895. The German ZEW investor economic sentiment survey for April is scheduled at 1000 GMT.
The Australian dollar, considered a liquid measure of risk appetite, fell 0.2% against the US dollar at 0.7609.
On Monday, Australia gave up its goal of vaccinating nearly the entire population by the end of 2021.
The New Zealand dollar also fell 0.1%. The Reserve Bank of New Zealand will meet on Wednesday and is expected to keep rates constant.
The British pound gained 0.1% against the dollar at $ 1.3763. The UK economy boomed in February as companies prepared to lift the third blockade of the coronavirus, gross domestic product figures showed.
Elsewhere, bitcoin was up 1.6% at $ 60,807.77, ahead of Coinbase Global Inc, the largest US cryptocurrency exchange, which was listed on the Nasdaq on Wednesday.
Reporting by Elizabeth Howcroft, published by Larry King