The dollar climbed to a one-year high against the yen on Tuesday amid soaring Treasury yields as accelerated vaccinations and massive US stimulus heightened inflation concerns.
The dollar, regarded as a safe haven, also found support amid growing investor concerns about the potential fallout from the collapse of hedge fund Archegos Capital.
The dollar rose to 110.17 yen in the morning in Europe, a level not seen since March last year. It’s the best month since late 2016, with Japan’s fiscal year-end this month spurring demand for the dollar as companies tidy up their ledgers.
The yield on 10-year Treasuries rose to 1.7450% in Asia, close to a 14-month high of 1.7540% reached earlier this month. The yield on the five-year bonds rose to 0.9170% for the first time since March last year.
Higher returns make the currency more attractive for investment.
According to Chris Weston, head of research at Pepperstone Markets Ltd, a Melbourne-based foreign exchange broker, these gains in yields will keep the dollar going upward.
“The dollar has moved into a different asset class and is now viewed more as an investment asset,” he wrote in a note to a client.
The euro fell near a 4.5-month low of $ 1.1740. This month, it will fall at its maximum since mid-2019.
Tightening coronavirus containment measures in France and Germany have darkened the short-term outlook for the European economy, while widening spreads between US and German bond yields are increasing pressure on the single currency.
The dollar index, also known as the DXY code, updated its 4.5-month high at 93.09.
“The 93.0 breakout is just a matter of time,” Westpac strategists wrote in a report earlier today.
“So far, there are no signs that the DXY rally has run its course. The door for testing the 94.50 high is open. “
Investors will be keeping a close eye on the monthly US nonfarm employment report later this week, with policymakers so far citing labor market weakness to justify the continuation of extremely low interest rate policies.
“The market is pretty optimistic about the upcoming employment report. Therefore, it is very likely that the dollar will find strong support, ”said Jane Foley, currency strategist at Rabobank.
However, “the market risks being mistaken by pricing too high an inflationary risk,” which means “we see opportunities for the US dollar to weaken in the coming months,” the report said.
On Wednesday, President Joe Biden outlines a new $ 3 trillion to $ 4 trillion aid plan. This will already be spending on America’s infrastructure projects.
Biden said 90% of US adults will be eligible for vaccinations by April 19, and 90% of Americans will have a vaccination center within 8 km of their home by then as his team ramps up vaccination efforts amid a surge in COVID cases. 19.
As for cryptocurrencies, bitcoin surged above $ 58,000 overnight after Visa Inc said it would allow cryptocurrencies to be used to settle transactions on its payment network, the latest sign of the growing adoption of digital currencies on both Wall Street and Maine. straight.
The token last traded around $ 57,000, continuing to recover from the $ 50,360 low reached last week. Earlier this month, it set an all-time high of $ 61,781.83.