LONDON (Reuters) – The dollar struggled to a low point in a week on Tuesday as traders became wary of the outlook for the greenback amid a large US fiscal stimulus package.
Investors have been pushing the dollar in recent weeks as Democrats switched to President Joe Biden’s accelerated $ 1.9 trillion COVID-19 aid package, but some analysts say massive fiscal spending coupled with continued ultra-easy monetary Federal Reserve will be a dollar headwind.
“Opinions differ about the effects the package will have on the US economy,” said Commerzbank strategists.
“Where until recently the prospect of fiscal support caused positive reactions in the markets, the market no longer seems to be completely sure about it.”
After attempting to boost in the previous session, the dollar broadly weakened against its counterparts as yields on US Treasuries softened from overnight highs.
The largest beneficiary of the weakening dollar was cryptocurrencies with bitcoin skyrocketing above $ 48,000, building on a nearly 20% overnight rise after Tesla Inc announced a $ 1.5 billion investment in the digital asset.
The dollar index was 0.3% lower at 90.73 during early London trading, after falling to 90.603 for the first time since February 1.
Disappointing US job data on Friday took the wind off a two-week run that lifted the dollar to its high at 91.6 in more than two months.
The euro rose 0.2% to $ 1.20775 on Tuesday, up from a two-month low of $ 1.9520 hit Friday.
The British pound peaked again since May 2018, rising to $ 1.3784 in Asia. It last traded up 0.3% against $ 1.3774.
Image: USD positions
Reporting by Saikat Chatterjee; Editing by Kirsten Donovan