The U.S. dollar gained on Monday, climbing towards a 3-1/2-month high, as a broad rise in Treasury yields spooked investor sentiment in stock markets.
Having fallen 4% in the last quarter of 2020, the dollar has strengthened more than 2.4% year-to-date against rivals as investors expect the broad rise in U.S. bond yields to weigh on stretched equity valuations and boost the greenback’s appeal.
“Rising U.S. yields have added to equity market volatility and supported the US dollar,” UBS strategists said in a daily note. “The Federal Reserve remains dovish, but chair Jerome Powell chose not to push back verbally against higher yields providing a further short-term boost to the greenback.”
Yield trends have diverged across major markets.
While U.S. yields increased a hefty 10 basis points last week, German yields dipped nearly 5 basis points, pulling the euro to a near four-month low below the $1.19 level.
BofA analyst Athanasios Vamvakidis argued the potent mix of U.S. stimulus, faster reopening and greater consumer firepower was a clear positive for the dollar.
The Senate passed a $1.9 trillion COVID-19 relief plan, a day after a stunning U.S. jobs report sent the greenback to its highest level since November 2020.
The dollar index stood at 92.186 against a basket of six major currencies, up 0.3% and just shy of a late-November high of 92.201 set on Friday.
The Australian dollar rose 0.2% to $0.7696, but was well off its session high of $0.77230. The New Zealand dollar was down about 0.1% after earlier rising 0.4% to $0.719.
The antipodean currencies have been in demand because of their links to the global commodities trade.
The dollar held near a one-month high against the British pound, at $1.3819. Against the low-yielding yen JPY=EBS, the greenback held steady at 108.46 yen, having hit a nine-month high of 108.645 on Friday.
-Reuters