Dollar firm amid U.S. yield spike; bitcoin back below $60,000 following surge to record high

The U.S. dollar held firm on Monday after bouncing off a one-week low last week, supported by a spike in benchmark Treasury yields to more-than-one-year highs as inflation fears continued to smoulder.

Bitcoin retreated to below $60,000 amid a Reuters report that India will push ahead on a proposal to ban cryptocurrencies. It had surged to a record $61,781.83 over the weekend.

The greenback traded near its highest since June against the Japanese yen, which tends to weaken when Treasury yields rise.

Market participants have grown wary in recent weeks that massive fiscal stimulus and pent-up consumer demand could lead to a jump in inflation as expanding vaccination campaigns bring an end to lockdowns.

U.S. producer prices had their largest annual gain in nearly 2-1/2 years, data showed on Friday, while the country’s economy is set to get a massive shot in the arm from President Joe Biden’s $1.9 trillion stimulus package.

The outlook for the already brisk pace of U.S. vaccinations has also been boosted by Biden’s order for every state to make all adults eligible for vaccination by May 1.

The dollar index, which tracks the U.S. currency against six major peers, held around 91.645 early in Monday’s Asia session after climbing from near a one-week low of 91.364 at the end of last week.

Benchmark 10-year Treasury yields were at 1.6282% on Monday, close to Friday’s top of 1.6420%.

The dollar was largely flat at 109.04 yen on Monday, near the nine-month top of 109.235 reached last week.

The greenback has also been supported by a paring of bets for its decline, with speculators cutting net short positions to the lowest since mid-November in the week ended March 9, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

The dollar index has gained 1.8% this year, tracking the rise in benchmark yields from below 1%. In 2020, the gauge fell nearly 7%.

Many analysts expect the dollar to resume that downtrend in due course.

“Higher bond yields alone are unlikely to sustain the upswing in USD,” Commonwealth Bank of Australia analysts wrote in a research note, adding dollar declines were coming “soon”.

“The move higher in bond yields largely reflects the better economic outlook, which is ultimately a weight on the USD.”

The euro was mostly unchanged at $1.19535, consolidating just below $1.20 after sliding to a three-month trough of $1.18355 last week.

The Australian dollar – viewed widely as a liquid proxy for risk appetite – rose slightly to $0.7769, paring some of Friday’s 0.4% loss.

The Canadian dollar was largely flat, after earlier strengthening to C$1.2461 for the first time in three years. On Friday, a bigger-than-expected domestic jobs gain supported the view that the Bank of Canada would reduce quantitative easing purchases next month.

Bitcoin changed hands at around $59,940 after Reuters cited a senior government official as saying India will propose a law banning cryptocurrencies and fining anyone trading in the country or even holding such digital assets.

It would be one of the world’s strictest policies against the red-hot digital assets, and comes just as bitcoin and its rivals have been gaining credibility amid a wave of endorsements from big investors such as BlackRock Inc and corporate leaders including Tesla Inc’s Elon Musk and Twitter Inc’s Jack Dorsey.

Bitcoin has more than doubled in value this year, after more than quadrupling in 2020.

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Currency bid prices at 125 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.1959 $1.1953 +0.05% -2.12% +1.1961 +1.1945

Dollar/Yen 109.0150 109.0200 +0.04% +5.59% +109.1320 +109.0400

Euro/Yen 130.37 130.29 +0.06% +2.72% +130.4300 +130.2800

Dollar/Swiss 0.9283 0.9296 -0.15% +4.92% +0.9296 +0.9282

Sterling/Dollar 1.3941 1.3970 -0.19% +2.06% +1.3943 +1.3919

Dollar/Canadian 1.2457 1.2475 -0.11% -2.14% +1.2477 +1.2458

Aussie/Dollar 0.7768 0.7758 +0.16% +1.01% +0.7771 +0.7750

NZ 0.7209 0.7177 +0.46% +0.40% +0.7209 +0.7180

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ



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