TOKYO (Reuters) – The dollar extended its recovery from nearly three-year lows against major pairs on Thursday, supported by higher U.S. yields, as President-elect Joe Biden prepared to outline his massive fiscal stimulus plans .
The dollar index maintained the gains made on Wednesday at the start of the Asian trading session, with investors continuing to undo downward bets. The dollar has risen in four of the past five trading sessions, as the prospect of more stimulus weighed on US government bonds, sending the benchmark Treasury yield to over 1% for the first time since March.
Bitcoin also maintained the 10% gains made on Wednesday, as it rebounded after falling almost $ 12,000 from a historic high of $ 42,000 last week.
Biden will give details on Thursday of a “trillion” dollar plan to alleviate the pandemic. The 10-year Treasury’s yield soared after CNN said the package would be about $ 2 trillion, adding support for the dollar.
However, many analysts expect the currency’s recovery to be temporary, as an increase in bearish dollar positions is shaken.
In the long run, they expect more stimulus from the US to support the feeling of risk, weighing on the dollar, which is traditionally considered a safe haven.
“I think positioning in risky assets is becoming a concern, so there may be a tightening of the dollar in the short term,” said Shusuke Yamada, chief Japanese exchange strategist at Bank of America in Tokyo.
“I’m focusing on the dollar’s gradual weakness in 2021.”
Foreign exchange speculators have been without the dollar since mid-March, with investors’ growing appetite for riskier assets hampering demand for the dollar.
The dollar index added 0.1% to 90.431 after gaining 0.3% overnight. It dropped to 89,206 on January 6 for the first time since March 2018.
The euro fell 0.1% to $ 1.21405, after falling 0.4% on Wednesday.
The dollar advanced 0.2% to 104,075 yen, adding an increase of 0.1% previously.
Bitcoin changed little at $ 37,420 on Thursday, compared to $ 30,261.13 on January 11.
Interest in the cryptocurrency has increased as institutional investors began to buy heavily, seeing it both as protection against inflation and as exposed to gains if it became more widely adopted.
“That hasty sale that we saw recently, much of it was driven by the futures markets,” where positions have become overly extended and the resulting margin calls have pushed the price of bitcoin, said Seth Melamed, Tokyo cryptocurrency exchange COO.
“In spot markets, you only see this consistent buying beat.”
Kevin Buckland reporting; Editing by Ana Nicolaci da Costa and Simon Cameron-Moore