LONDON (Reuters) – The dollar held above its three-year low against major competitors on Thursday after expectations for President-elect Joe Biden’s fiscal stimulus pushed up yields on US Treasuries.
Yields on 10-year Treasury bonds surged after CNN reported the stimulus will be around $ 2 trillion, adding support for the dollar.
In early morning European trading, the dollar index had changed little, up 0.04% to 90,320, as investors waited for Biden to reveal details of a “trillion” dollar pandemic alleviation plan later today.
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.
Expectations for the stimulus are already high, but many analysts believe the spending pressure has already been priced in.
“We think the tax cat is already out of the bag: it would take a lot to surprise the markets after last week’s repricing,” said ING analysts. “The possibilities for the reflation trade to restart based on this announcement alone are limited.”
Additionally, the currency’s recent recovery is threatened by a build-up of bearish dollar positions.
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.
Because US stimulus packages support risk sentiment, they could weigh on the dollar, which is considered a safe haven.
The euro fell 0.05% to $ 1,214 after slipping 0.4% on Wednesday.
The dollar rose 0.13% to 104.02 yen.
Bitcoin retained a 10% gain on Wednesday, sliding nearly $ 12,000 from last week’s record of $ 42,000. It was up 3% to $ 38,860 Thursday, 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 profits when applied more widely.
Reporting by Kevin Buckland; edited by Ana Nicolaci da Costa, Simon Cameron-Moore, Larry King