Dollar index at intervals of 60 minutes
The dollar rose from a nearly three-week low against major rivals on Tuesday, boosted by rising Treasury yields as traders awaited much-anticipated US inflation data later on Tuesday.
The dollar has declined in line with US yields this month after rising to multi-month peaks on expectations that massive fiscal stimulus, coupled with continued monetary easing, will spur faster US economic growth and higher inflation.
Thursday’s retail sales data will also be closely monitored.
Boston Federal Reserve Bank President Eric Rosengren said Monday that the US economy could see significant recovery this year thanks to loose monetary and fiscal policies, although there is still room for improvement in the labor market.
The dollar index, also known as the DXY, gained 0.2% to hit 92.281 in the Asian session, pulling away from Thursday’s 91.995 low, which was its weakest since March 23. It climbed to nearly a five-month high of 93.439 last week.
“The DXY has been declining in recent days, but should gain stability as the US narrative of better macroeconomic performance is set to gain widespread publicity,” in data this week, strategists at Westpac wrote in a note to a client, forecasting a rise to 94,500.
“The issuance of Treasury bonds is growing in parallel with inflationary pressures, which are reflected in the data, which should lift the US dollar.”
Westpac expects 10-year Treasury yields this week to rise to the top of the recent 1.6-1.755% range.
The underlying yield rose about 2 basis points to 1.6926% on Tuesday, but was still well below the 1.7760% hit on March 30, which was its highest in more than one year.
The new proposal also sets the direction for yields this week: The Treasury will sell 30-year bonds on Tuesday following strong demand at three- and 10-year bond auctions on Monday.
“How Treasury yields respond to the (initial) supply this week and key US data will undoubtedly determine the direction of the dollar in the short term,” Rabobank currency strategist Jane Foley wrote in a report.
“A strong (CPI) index could reinforce inflation concerns and support the US dollar.”
Foley predicts that the dollar will trade “volatile” in the range of 1.17 to 1.20 dollars against the euro; on Tuesday, it added 0.2% to $ 1.18890.
The US currency strengthened 0.3% to 109.73 yen after falling below 109 last week for the first time since March 25.
The Australian dollar fell 0.3% to hit $ 0.75990 while the British pound fell 0.1% to hit $ 1.37305.
In terms of cryptocurrencies, Bitcoin traded slightly higher at $ 60,369.01, narrowing the gap to an all-time high of $ 61,781.83 hit a month ago.