Forex

Dollar wallows at two-week low; bitcoin steadies after surge past $48,000

Reuters TOKYO | Updated on February 10, 2021

Traditionally viewed as a safe haven, the dollar has sunk against major peers as optimism over monetary and fiscal support from policymakers.

 

The dollar traded near two-week lows as demand for safer assets ebbed on Wednesday, with traders looking ahead to an expected recovery from the Covid-19 pandemic this year, driven by massive fiscal and monetary stimulus.

Bitcoin consolidated around $46,500 after reaching a new high at $48,216 overnight following Tesla's disclosure of a $1.5 billion investment in the leading cryptocurrency. "The economic outlook for the year, according to market consensus, appears to be buoyant," said Michael McCarthy, chief strategist at CMC Markets in Sydney, pointing to the weakerdollar. "Sentiment and positioning are key drivers of the market right now."

Traditionally viewed as a safe haven, the dollar has sunk against major peers as optimism over monetary and fiscal support from policymakers, robust corporate earnings and the prospect that coronavirus vaccines could hasten a return to normality in the United States and elsewhere have bolstered risk sentiment.

The dollar index edged higher to 90.509 early in the Asian session on Wednesday, following a two-day loss that took it as low as 90.427 for the first time this month.

There has been a tug-of-war among traders over the impact on the dollar of President Joe Biden's planned $1.9 trillion fiscal stimulus package. On one hand, it should speed a U.S. recovery relative to other countries, bolstering the currency; on the other, it is a major driver in a global reflation narrative that should 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. "Friday's disappointing payrolls completely flattened the USD, that data point casting doubt on the budding U.S. outperformance narrative and refocusing minds on the prospect for sustained reflationary U.S. fiscal and monetary policy,"they wrote in a client note on Wednesday. "Nursing eye-catching losses, a test of 90 on the cards incoming days," the note said, referring to the dollar index.

The dollar added 0.1% to 104.68 yen, after dipping as low as 104.5 for the first time this month in the previous session. The euro weakened less than 0.1% to $1.21105following a three-day gain. The British pound was about 0.1% lower at $1.3803after renewing an almost three-year high at $1.382 overnight.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on February 10, 2021
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.