NEW YORK Reuters) – The US dollar hit a 3-1 / 2 month high against a basket of currencies on Monday amid expectations of strong US economic growth and rising inflation, which also drove higher Treasury yields, reinforcing the appeal of the greenback as a safe haven. .
After falling 4% in the last quarter of 2020, the dollar has strengthened nearly 2.5% year-to-date as investors expect the sharp rise in U.S. bond yields to weigh on foamy stock valuations and stimulates demand for the US dollar.
“If we continue to see yields rise, it will be very positive for the dollar and there is nothing that can really get in our way,” said Edward Moya, senior market analyst at OANDA in New York.
Strong US employment figures and Senate approval of President Joe Biden’s $ 1.9 trillion recovery program also supported the dollar.
“The US job market is healing fast, President Biden’s gargantuan relief package has been approved by the Senate and America has stepped up its vaccination game by administering a record number of vaccines this weekend,” said Marios Hadjikyriacos , investment analyst at XM.
US Secretary of Commerce Gina Raimondo said on Monday that a strong dollar was “good for America” and rejected calls for the greenback to weaken.
U.S. Treasuries yields were on hand from a one-year high above 1.62% hit on Friday, contrasting with German yields, which fell nearly 5 basis points on the week last, pulling the euro to a nearly four-month low below $ 1.19.
The dollar index rose 0.53% to 92.38 against a basket of six major currencies, its highest level since November 24.
MSCI’s Emerging Markets Currency Index fell as much as 0.8% for its biggest daily decline since the pandemic that rocked markets in March 2020. The index slipped to a three-month low of just under 1,700 points.
With exchange rate volatility, Consumer Price Index data released on Wednesday and Producer Price Index data expected on Friday will be closely watched, as will the 10-year US Treasury auction and 30 years Wednesday and Friday, respectively.
“For the first time in more than a decade, inflation numbers and Treasury auctions will start to matter,” said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management.
“If the data is not as high as the market thinks it is, then I think we will probably have a slight pullback in the dollar,” he said.
The dollar held on to a nine-month high against the yen at 108.875 yen and was close to a one-month high against the British pound at $ 1.3839.
(Chart for USD positions 🙂
Reporting by John McCrank in New York; additional reporting by Saikat Chatterjee in London; Editing by Alexander Smith and Nick Zieminski