Dollar retreats from one-month high as traders eye Biden’s FX policy

The dollar slipped from close to its highest in nearly one month on Tuesday as caution set in before U.S. Treasury Secretary nominee Janet Yellen testifies later, with traders keeping a close eye on the policies of the incoming Joe Biden government. The greenback weakened against most major peers as stocks in Asia rallied, lifting risk sentiment and curbing demand for safe-haven currencies like the dollar and Japanese yen.

The dollar index slipped about 0.1% to 90.708 in the Asian session, a day before U.S. President-elect Joe Biden is set to be inaugurated. On Monday, the gauge ended 0.1% lower after earlier climbing to 90.94 for the first time since Dec. 21, as the Wall Street Journal reported Yellen will affirm a more traditional commitment to market-set currency rates in a Senate testimony on Tuesday. That’s in stark contrast to outgoing President Donald Trump, who often railed against dollar strength.

The greenback has started the year with a near 2% rally against major peers, supported by a rise U.S. Treasury yields in response to Biden’s plan for a

.9 trillion pandemic relief package. The dollar fell close to 7% last year on expectations U.S. monetary policy would stay ultra-loose and amid hopes for a post-pandemic global recovery.

The euro rose 0.2% to

.2095, after dipping to .2054 for the first time since Dec. 2 on Monday, in subdued trading with U.S. markets closed for Martin Luther King Jr. Day. The riskier Aussie dollar rose 0.3% to 77.082 U.S. cents, reversing a decline of more than 0.2% overnight. The dollar gained 0.3% to 104.05 yen, although still consolidating in a narrow range after reaching a one-month high of 104.40 last week.

Dollar retreats from one-month high as traders eye Biden’s FX policy, Reuters, Jan 19