Dollar pummeled, Aussie soars as reflation trades grip FX markets

The dollar remained at multi-year lows against the Antipodean currencies and held near a one-month low versus the euro as reflation trades gripped the currency markets on Wednesday.

Federal Reserve Chair Jerome Powell reiterated on Tuesday that U.S. interest rates will remain low and the Fed will keep buying bonds to support the U.S. economy. The dollar resumed its decline towards the lows recorded at the start of the year after a brief rally in late January.

Money flowed from safe havens like the dollar, Swiss franc and the Japanese yen towards currencies expected to benefit from a pick-up in global trade, and to countries like Britain that are recovering quickly from the coronavirus pandemic.


“The extension of weakness in safe haven currencies such as the Swiss franc appears consistent with building confidence in the global economic recovery,” MUFG strategists said in a note.

Some notable moves were seen in the currency markets this week. The franc weakened below 1.10 francs per euro for the first time since the end of 2019, with a global rise in bond yields also curtailing the appeal of the safe-haven currencies.

The dollar’s weakness in recent days has been more remarkable as it comes against the backdrop of a broader rise in U.S. yields. Benchmark 10-year borrowing costs are holding near their highest in nearly a year.

The dollar index against a basket of six major currencies was at 90.111, near the six-week low of 89.941 it reached overnight.

“Risk appetite has improved a lot, and this leaves the dollar at a big disadvantage,” said Junichi Ishikawa, foreign exchange strategist at IG Securities.

The Australian dollar, which tends to benefit from rising metal and energy prices, rose to a three-year high of $0.7945 before paring gains to trade 0.1% stronger at $0.7914.

The euro bought $1.21495, close to the one-month high of $1.2180 set overnight. The British pound climbed past $1.42 overnight for the first time since April 2018.

Dollar pinned near six-week low as focus turns to Powell

The dollar nursed losses near a six-week low on Tuesday while commodity currencies loitered around multi-year highs, as investors’ focus shifted to how U.S. Federal Reserve chief Jerome Powell might respond to resurgent inflation expectations.

Surging prices for materials from oil and copper to lumber and milk powder have pushed currencies such as the Australian and New Zealand dollars to their highest in nearly three years.

However the gains have come with a worldwide rise in inflation expectations and a big sell-off in longer-dated bonds.

Traders expect Powell, who testifies before Congress at 1500 GMT, to provide some reassurance that the Fed will tolerate higher inflation without immediately hiking rates, which they said could calm bond markets and eventually weigh on the dollar.

“I think he will talk up the downside,” said Commonwealth Bank of Australia currency analyst Joe Capurso in Sydney.

“If anything, I think he will give markets a bit of a cold shower and say: ‘Mr Market you’re getting a bit ahead of yourself. There are plenty of risks…and the U.S. economy is long, long way from full employment.’”

Morning moves were slight ahead of his appearance, but renewed confidence that low U.S. interest rates will not lift anytime soon can likely clear the way for further gains in trade-exposed currencies at the dollar’s expense.

The U.S. dollar index sat at 90.019 on Tuesday, just above its lowest since mid January. The Australian dollar last bought $0.7913 and the kiwi $0.7323, with both trading broadly steady early in the Asia session.

The euro made a small gain to $1.2165 and is poised to re-test resistance around $1.2220.

Sterling, which has rallied nearly 3% this year as a speedy vaccine rollout has inspired confidence in the prospect of a British economic rebound, held above $1.40 at $1.4067.

The Japanese yen, which has been the worst performing major currency of 2021 because it is sensitive to tumbling U.S. Treasury prices, steadied at 105.02 per dollar.

Elsewhere bitcoin steadied above $50,000 after a wild overnight ride where it traded in a $10,000 range and dropped as low as $47,400.

Dollar falls as improving sentiment boosts riskier currencies

The U.S. dollar fell to a three-year low against its Australian counterpart and teetered near three-year low against the British pound as progress in curbing coronavirus infections boosted sentiment for riskier assets.

The greenback also slipped toward a three-year low against the New Zealand dollar as traders sought currencies with close ties to the global commodities trade due to an improving economic outlook.

The U.S. currency, which is often considered a safe asset during times of uncertainty, is likely to fall further as more investors focus on economic recovery once the worst of the coronavirus pandemic passes.

“Commodity currencies and the pound are particularly strong against the dollar, and this trend looks set to continue,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities.

“Britain’s vaccination programme is making a lot of progress. Economic activity is gradually returning to normal in many places, which puts some pressure on the dollar.”

The Australian dollar hit $0.7892, its highest since March 2018 while the New Zealand currency rose to $0.7315, its strongest since April 2018.

Vaccine rollouts will ease risks to Australia’s economy over the year, ratings agency Fitch said on Monday when it maintained the country’s top AAA credit rating, albeit with a negative outlook.

The euro last traded at $1.2124

The British pound bought $1.4030, close to a three-year high.

Against the yen, the dollar held steady at 105.45

Australia on Monday began its mass COVID-19 vaccine program as the country looked set to report no local cases for the third straight day, which gave the Aussie a boost.

Sterling is also in focus because British Prime Minister Boris Johnson will plot a path out of coronavirus lockdowns later on Monday, aided by one of the fastest vaccine rollouts in the world.

Dollar net short positioning fell last week to $29.09 billion, which is the lowest level since mid-December, according to calculations by Reuters and Commodity Futures Trading Commission data.

U.S. dollar net shorts have fallen for four straight weeks, which shows that there are still some investors who are optimistic about the greenback.

Long-term Treasury yields have been rising recently, and the United States has also improved its response to the coronavirus, which will lend the dollar some mild support, Daiwa’s Ishizuki said.

In the cryptocurrency market, bitcoin eased slightly to $57,090, but was still near a record high as the digital asset gains more mainstream acceptance.

Ether, a rival cryptocurrency, fell to $1,918.

Dollar nursing losses after jobs data mars recovery narrative; sterling buoyant

The U.S. dollar maintained its biggest loss in 10 days on Friday after disappointing U.S. labor market data bruised optimism for the country’s speedy recovery from the COVID-19 pandemic.

The greenback continued to buck its traditional role as a safe-harbor currency, falling in sympathy with U.S. stocks overnight after an unexpected increase in weekly jobless claims soured the economic outlook.

The British pound traded near an almost three-year high reached overnight, when it surged the most in more than a month, amid Britain’s aggressive vaccination program.

The dollar index was little changed at 90.584 early in the Asian session, after a 0.4% decline overnight cut short a two-day winning streak. For the week, the gauge is now back to more or less break-even.

The string of soft labor data is weighing on the dollar even as other indicators have shown resilience, and as President Joe Biden’s pandemic relief efforts take shape, including a proposed $1.9 trillion spending package.

“The prospect of a massive U.S. fiscal stimulus plus a successful vaccine roll-out are solid arguments to bet on a U.S. recovery this year,” Rodrigo Catril, senior foreign exchange strategist at National Australia Bank in Sydney, wrote in a client note.

“But the overnight jobless claims data serve as a reminder of the unevenness of the recovery so far.”

Sterling was mostly flat at $1.3965 on Friday following a 0.8% jump in the previous session, when it rose as high as $1.3986 for the first time since April 2018.

The euro was little changed at $1.2089 after rising 0.4% overnight.

The dollar bought 105.695 yen, little changed following a two-day retreat from the five-month high of 106.225 reached Wednesday.

In cryptocurrencies, bitcoin continued to hover around $51,500, consolidating after hitting a record $52,640 on Wednesday in a rally fueled by endorsements from Tesla Inc <TSLA.O> and others. It has risen about 78% so far in 2021, after more than quadrupling last year.

Smaller rival ethereum rose to a record $1,951.89 on Friday, just pipping the previous day’s high. It has surged some 162% this year.

On Thursday, chipmaker Nvidia Corp announced a new processor designed specifically for mining ethereum.

Dollar buoyed by U.S. recovery hopes, bitcoin near record $52,640

The dollar held its ground on Thursday after its first back-to-back gains in two weeks as upbeat data bolstered expectations that the U.S. economy would recover from the coronavirus pandemic faster than most of its peers.

Bitcoin traded just shy of the new record high of $52,640 reached overnight, with its roughly 58% surge this month prompting some analysts to warn that the rally might be unsustainable.

Government stimulus checks helped U.S. retail sales rebound sharply in January, while industrial output and producer prices data also provided robust upside surprises.

Investors expect a further boost from Joe Biden’s proposed $1.9 trillion COVID-19 relief package, with the president meeting top labor leaders on Wednesday to drum up support for the plan.

Meanwhile, minutes from the Federal Reserve’s policy meeting last month reinforced the central bank’s willingness to let the economy run hot while keeping monetary settings ultra-accommodative.

“Biden’s stimulus plans, a steep decline in new infections and rapid vaccine rollout leave the U.S. well positioned to recover sooner than most,” Westpac strategists wrote in a client note.

“That will generate periodic bouts of USD upside.”

However, like many analysts, Westpac’s team expects the dollar to decline this year, weighed by the Fed’s relentless money printing.

The dollar index was little changed at 90.943 on Thursday in Asia after strengthening 0.2% overnight and 0.4% on Tuesday.

The gauge has gained about 1% this year, rebounding from an almost 7% slide in 2020 that extended to a 2-1/2-year low of 89.206 in early January.

Westpac recommends fresh dollar index shorts on rallies toward 91.0.

The euro was little changed at $1.20385 after sliding 0.5% overnight, the most in two weeks.

The dollar was almost flat at 105.845 yen, following a pullback Wednesday after reaching a five-month high of 106.225.

Treasury yields have given the dollar a boost in recent days, with the yield on the benchmark 10-year note rising as high as 1.333% overnight from around 1.20% at the end of last week. It pulled back in Asia on Thursday to 1.2669%.

“Rising U.S. yields have stopped the dollar from declining for now,” said Osamu Takashima, the Tokyo-based head of G10 FX strategy at Citigroup Global Markets Japan.

“In the longer term, we remain bearish on the U.S. dollar: we expect a risk-on environment globally and under such circumstances we think downward pressure on the U.S. dollar could revive.”

Takashima expect the dollar to rise to as high as 107 yen before slumping to 102 over the next three months.

Dollar hits 4-month high against yen as yields jump on inflation bets

The dollar advanced on Wednesday, hitting a four-month high against the yen as U.S. bond yields jumped on the prospects of further economic recovery and a possible acceleration in inflation.

Bitcoin held firm, a day after the cryptocurrency hit $50,000 for the first time, bringing its total market capitalization to more than $900 billion, as traders bet on its further acceptance among major companies.

The dollar’s index against six other major currencies jumped back to 90.681, from a three-week low of 90.117 hit on Tuesday

Boosting the dollar was soaring U.S. bond yields, with the 10-year yield rising to 1.331% from around 1.20% at the end of last week.

“The move up in yields has been driven by increasing inflationary concerns amid a rise in energy prices along with the prospect of a big U.S. fiscal stimulus and the global recovery entering a more solid stage as vaccine roll out lead to the reopening of economies,” said Rodrigo Catril, senior FX strategist at National Australia Bank in Sydney.

The yen, which is sensitive to U.S. yields, reacted the most with the dollar jumping to a four-month high of 106.225 yen. It last stood at 106.13 yen.

“I think the dollar’s downtrend is over. At the start of the year, speculators were betting on a fall in the dollar below 100 yen. They seem to have abandoned such a view now,” said Yukio Ishizuki, senior strategist at Daiwa Securities.

The euro slipped slightly to $1.2085 though its fall was less pronounced due to its gains earlier on Tuesday following strong German economic sentiment data.

The New York Federal Reserve’s Empire State manufacturing report released on Tuesday offered an upbeat economic picture, with a rise in its “prices paid index” stoking fear of faster inflation.

That optimism was echoed by St. Louis Fed President James Bullard, who told CNBC that U.S. financial conditions were “generally good,” and that inflation was likely to heat up this year.

San Francisco Fed President Mary Daly, however, said pressures on inflation are still downward, pushing against critics warning low interest rates and government spending could overheat the U.S. economy and spark high inflation.

“Her comments are not resonating with market players preoccupied with inflation at this point,” said Daiwa’s Ishizuki.

The positive mood on the economic outlook is underpinning risk-sensitive currencies.

The British pound held firm at $1.3863, having reached its highest level since April 2018 on Tuesday. Against the euro, the pound traded at its highest level since early May at 87.07 pence per euro.

The Australian dollar stood at $0.7734, down slightly but still not far from Tuesday’s one-month high of $0.7805.

The offshore Chinese yuan also stepped back after hitting a 2-1/2-year high of 6.4010 per dollar and last stood at 6.4269.

Dollar in doldrums as recovery optimism thrives

The U.S. dollar was pinned down on Tuesday, as vaccine optimism boosted the British pound to an almost three-year high, while rising oil prices and buoyant expectations for global recovery supported commodity and trade-exposed currencies.

In trade thinned by Lunar New Year holidays in China and Monday’s U.S. holiday, the positive mood also weighed on the safe-haven yen which made a one-week low on the dollar overnight and fell to more than two-year lows on the euro and the Aussie.

The U.S. dollar index, which measures the dollar against a basket of six major currencies, sat at 90.351, not far above a two-week low it struck last Wednesday.


The Chinese yuan, a favored vehicle for playing the dollar’s weakness in Asia, was on the brink of strengthening past 6.4 per dollar for the first time since mid-2018 and last stood at 6.4033 in offshore trade.

The risk-sensitive Australian dollar held near Monday’s one-month high at $0.7785.

“The dollar tends to underperform when you see this broad positive sentiment in markets,” said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney.

“There are also inflationary pressures particularly coming from energy prices,” he said, which is pushing up nominal yields — adding another weight on the yen as that can attract flows from Japan — but keeping real returns on Treasuries steady.

Bitcoin hovered just short of $50,000 as profit taking paused the cryptocurrency’s steep rally that has carried it more than 60% higher in 2021 so far.

The yield on benchmark ten-year U.S. Treasuries <US10YT=RR> leapt five basis points to 1.2501% in early Asia trade on Monday, while most major currencies were steady.

Sterling, which broke past $1.39 for the first time in almost three years on Monday, held at $1.3912. It also held steady at 87.15 pence per euro, its highest since May 2020.

Sterling has gained as much as 2.5% on the dollar in less than two weeks as the aggressive rollout of Britain’s COVID-19 vaccination programme has raised expectations its economy will be able to recover more swiftly than European peers’.

The euro was steady at $1.2132 on Tuesday while the yen, which has dropped 2% so far this year, nursed losses at 105.36 per dollar. The yen also hit its lowest since late 2018 against the euro and the Australian dollar and hit a three-year low on the Swiss franc.

“The yen has been the worst performing currency of 2021, with its negative correlation to U.S. Treasury yields proving to be the biggest dampening factor,” said Francesco Pesole, currency strategist at Dutch bank ING in a note to clients.

“When adding weak safe-haven demand as the global recovery gathers pace, some additional trimming of yen net long positions may be on the cards.”

Ahead on Tuesday, investors are looking to eurozone growth estimates, a German sentiment survey and U.S. manufacturing data to gauge the relative pace of the world’s pandemic recovery.

Dollar held down by doubts over pace of U.S. recovery; bitcoin retreats from record high

The dollar started the week pinned near two-week lows on Monday as traders questioned whether the recovery from the pandemic in the United States would be as fast as expected.

Bitcoin remained volatile, retreating to as low as $45,914.75 a day after reaching a record $49,714.66.

The world’s most popular cryptocurrency had rallied 25% last week, driven by endorsements from Tesla and BNY Mellon.

The dollar index slipped 0.1% to 90.336, close to last week’s low of 90.249 — a level unseen since Jan. 27.

The gauge hit a two-month top of 91.6 on Feb. 5 on hopes that a U.S. rebound would outpace other major economies, but has since pulled back amid disappointing employment data.

“Now the market is looking for actual evidence that the U.S. economy is outperforming,” said Shinichiro Kadota, senior currency strategist at Barclays Capital in Tokyo.

“The economic data needs to improve.”

The euro edged 0.1% higher to $1.21315, extending last week’s 0.6% advance.

The dollar rose 0.1% to 105.04 yen, recovering some of the previous week’s 0.4% loss.

Many financial markets in Asia remained closed on Monday for Lunar New Year, with the United States also out for Presidents Day.

Riskier currencies gained against the greenback, with the Australian dollar adding 0.3% to 77.795 U.S. cents after earlier touching a one-month high of 77.85.

The British pound appreciated 0.3% to $1.3895 after renewing an almost-three-year high at $1.3901.

The Chinese yuan reached its strongest level since June 2018 at 6.4012 per dollar in the offshore market.

In cryptocurrencies, bitcoin last traded 3.7% lower at $46,852.

Rival virtual coin ethereum, which often trades in tandem with bitcoin, slumped 4.3% to $1,725. It reached a record high of $1,874.98 on Saturday.

Dollar falls to two-week low as benign inflation, U.S. yields weigh

The dollar dropped to two-week lows on Wednesday in choppy trading, led by losses against sterling and the euro, weighed down by U.S. data showing tepid inflation and a slippage in Treasury yields.

U.S. benchmark 10-year yields were last at 1.136%, down 2 basis points from Monday’s level. The dollar extended losses after data showed U.S. underlying inflation remained benign. Excluding the volatile food and energy components, the CPI was unchanged for a second straight month. Tame inflation data made it more likely the Federal Reserve would keep interest rates ultra-low.

“The momentum for the dollar right now has turned a little bit lower,” said Erik Nelson, macro strategist at Wells Fargo in New York.

“We’re not ready to throw in the towel on our view of a short-term bullish trend for the dollar. But our conviction on that view has lessened a bit. It seems that there has been a perceptible shift toward momentum.” The dollar index drifted to a two-week low of 90.36, and set for a third day of losses. It last traded 0.2% lower at 90.324.

Traditionally viewed as a safe-haven, the dollar has sunk against major peers as optimism over monetary and fiscal support, robust corporate earnings and coronavirus vaccines bolstered risk sentiment.

Bitcoin, meanwhile, consolidated recent gains on Wednesday, trading 3.7% lower at $44,799. It hit a new high of $48,216 on Tuesday following Tesla’s disclosure of a $1.5 billion investment in the virtual currency.
Rival virtual currency ethereum, which often moves in tandem with bitcoin, reached a record $1,839 on Wednesday before pulling back slightly. It was last down 3.8% at $1,706.

Sweden’s crown strengthened to a one-month high of 10.0406 crowns per euro ahead of the central bank’s interest rate decision, then pared some of those gains after the bank kept monetary policy unchanged as expected. Foreign exchange traders have been waging a tug-of-war over the impact on the dollar of U.S. President Joe Biden’s planned $1.9 trillion fiscal stimulus package.

On one hand, it is expected to speed a U.S. economic recovery, bolstering the currency. But on the other, it could heat up inflation which would lift riskier assets at the dollar’s expense.

After a strong start to the year for the greenback, the latter view appears to be regaining sway, with last week’s U.S. jobs data providing the turning point, according to Westpac analysts.

The dollar gained 0.1% against the yen to 104.67 yen. The Japanese currency earlier hit its highest against the greenback since Jan. 29.

The euro edged up to $1.2132, adding to a three-day gain and hitting its highest since the start of February. The British pound set fresh three-year highs of $1.3865 and was last up 0.3% at $1.3847.

Dollar shackled by doubts over U.S. recovery; bitcoin tops $47,000 for first time

The dollar languished near its lowest in a week on Tuesday as investors began entertaining doubts about the scale of a recent rally driven by expectations of a faster pandemic recovery in the United States than elsewhere.

The spotlight remained on bitcoin as it reached a record above $47,000, building on a nearly 20% surge overnight that was the biggest since 2017, after Tesla Inc announced a $1.5 billion investment in the digital asset.

The dollar index against a basket of major currencies has vacillated around 91 since disappointing U.S. jobs data on Friday knocked the wind out of a two-week run that had lifted it to a more than two-month high of 91.6. It last traded at 90.935.

Investors had pushed up the greenback thanks to a faster U.S. vaccine rollout relative to most other countries, and as Democrats moved to fast-track President Joe Biden’s $1.9 trillion COVID-19 relief package.

Many analysts, though, see that massive fiscal spending coupled with continued ultra-easy Federal Reserve monetary policy dragging down the dollar in the longer term.

“The bottom line is a large stimulus is highly likely to pass soon, exacerbating the widening in the U.S. current account deficit, and weighing on the USD,” Commonwealth Bank of Australia currency analyst Joseph Capurso said in a client note.

Europe’s “lagging” vaccination program will cap the euro near-term but the continent should catch up by the summer, after which the single currency could rally to $1.28 for the first time since 2014, he said.

The euro was little changed at $1.2055 in early Asian trading on Tuesday, up from the two-month low of $1.9520 touched Friday.

The dollar was mostly flat at 105.21 yen, after climbing to 105.765 at the end of last week for the first time since October.

Elsewhere, Tesla sent bitcoin surging by saying in its 2020 annual report on Monday that it had bought $1.5 billion of the world’s most popular cryptocurrency as part of its broad investment policy, and that it expected to begin accepting the digital asset as payment for its products “in the near future.”

“This is a turning point for how we view digital currencies,” said Junichi Ishikawa, a foreign-exchange strategist at IG Securities in Tokyo.

“From here on, bitcoin will be genuinely considered as an asset available for selection by asset managers in their portfolios.”

Bitcoin traded at $47,073 after pushing to a new record at $47,565.86 on Tuesday.

Rival coin ethereum changed hands at $1,746.50 after reaching an unprecedented $1,784.85 on Monday.