Rate this post
January 11, 2021 @ 13:19 +03:00
The dollar gained broadly on Monday as widening U.S. Treasury yields and expectations of more fiscal stimulus lifted the greenback against its rivals, with the euro falling to a two-week low. President-elect Joe Biden, who takes office on Jan. 20 with Democrats able to control both houses of Congress, has promised “trillions” in extra pandemic-relief spending. Ordinarily, the extra spending plans would force investors to worry about rising inflation and its detrimental impact on the U.S. dollar in a weak economy but the currency has been supported in recent weeks thanks to rising U.S. yields.
Measured in inflation-adjusted terms, U.S. 10-year real Treasury yields are rising faster than their European counterparts. As a result, the euro fell to $1.2167, its lowest since Dec. 25, after climbing to $1.2349 last week. “It is hardly surprising that the recent acceleration in real U.S. yields has reminded the FX markets to end its focus on inflation and to assume a more comprehensive approach in its dollar valuation,” Commerzbank strategists said in a note. “That means: things are not looking so bad for the dollar at present that EUR-USD levels of 1.2350 and above would currently be justified.”
The nominal yield on benchmark 10-year U.S. debt is up more than 20 basis points to 1.1187% this year, helping the dollar to rise to a one-month high of 104.20 against the Japanese yen. The dollar index has lost roughly 12% since a three-year peak in March. However, it is now more than 1.3% above the almost three-year low it hit last week. It rose 0.1% to 90.418 on Monday.
Euro slips to two-week lows as U.S. yields rise, Reuters, Jan 11