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Inflation data will determine the dynamics of the dollar

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The dollar bounced off 2.5-week lows against major currencies on Monday. But the decline in Treasury yields held back the US currency.

The British pound fell to a two-month low, continuing its decline from a nearly three-year high reached in February, with analysts pointing to fears of blood clots following the AstraZeneca vaccine, which the UK has relied heavily on for its aggressive vaccination program.

Bitcoin traded above $ 60,000, closing the gap to an all-time high.

Both the dollar and Treasury yields have taken a breather after forming multi-month peaks late last month on bets that an accelerated US recovery from the pandemic will accelerate inflation, which is also expected by Federal Reserve policymakers over the long term.

While repeated insistence from the Fed that short-term price pressures would be temporary reassured investors this month, the dollar strengthened on Friday following stronger-than-expected producer price data, erasing the worst-week losses for the currency this year. …

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The Dollar Index, which tracks the dollar against a basket of six peers, was largely unchanged at 92.29 in Europe in the morning after falling 0.9% last week. It dipped below 92 on Thursday for the first time since March 23.

The estimated yield on the 10-year Treasury bonds was 1.6622% after falling to 1.6170% last week. On March 30, it surged to more than an annual high of 1.7760%.


“The key to near-term forecasts will be whether yields continue to consolidate around these levels or rise,” which will support the dollar, National Australia Bank strategist Tapas Strickland wrote in a note to clients.

“The broader theme of the rapid recovery of the US economy continues to dominate, amid impressive vaccine introduction.”


Data on Friday showed the largest annual producer price gains in the US in 9.5 years, supporting expectations of higher inflation as the economy resumes fully on the back of improved public health and massive government funding.

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US consumer prices are due on Tuesday.

Fed Chairman Jerome Powell speaks Wednesday at the Washington Economic Club. In an interview on Sunday with CBS 60 Minutes, Powell said the US economy is at a “tipping point” with expectations for growth and hiring to pick up in the coming months, but he also warned of the risks of rushing decisions.

Against the euro, the dollar hovered around its lowest level since March 23 at $ 1.1901. It was bought at 109.66 yen, close to a two-week low below 109 hit on Thursday.


“The dollar has some upside this week,” Kimberly Mundy, strategist at Commonwealth Bank of Australia, wrote in a report.

“Strong US economic data will highlight the divergence between the fast recovery of the US economy and the slower recovery in other advanced economies.”


The dollar could return to 110 yen, she said, while the euro could lose most of its recent gains and return to a nearly five-month low of around $ 1.17.

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The British pound fell 0.2% to $ 1.36745, close to Friday’s low of $ 1.3670, a level not seen since February 8.

Bitcoin traded at $ 60,102.69 after rising to $ 61,222.22 over the weekend, hitting an all-time high of $ 61,781.83 set a month ago.

Miners did not sell newly minted tokens at a time of heightened demand from corporations and investors, according to Justin d’Anetan, digital asset sales manager at Diginex in Hong Kong.

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