Dollar Down in Consolidation, But Still Buoyed

Dollar Down in Consolidation, But Still Buoyed

The Dollar Index declined 0.2% at 92.130 At 3:55 AM ET (0755 GMT). It retreated from an earlier climb of 92.528, its highest level since late November.

On Tuesday, the dollar was down in early European forex trading, but remaining near multi-month highs. This was on the back of rising Treasury yields. Moreover, the expectation of a strong U.S. economic recovery.

The EUR/USD pair added 0.3% to 1.1883 after it fell to lows last seen in late November 2020. That was ahead of the release of the latest revision of the euro zone’s Q4 GDP data later Tuesday.

Also, it was ahead of the European Central Bank’s handing down of its policy decision on Thursday. Monday’s data indicated that the central bank hadn’t noticeably stepped up its purchases of bonds two weeks ago. This was when inflation jitters grabbed world markets. 

At 1 PM ET (1800 GMT) will be the sale of three-year Treasury notes, another test for the market’s appetite.  This comes a week after a poorly-received auction of seven-year notes triggered a steep rise in yields. 

Notably, three-year maturities are more sensitive to short-term interest rates. Moreover, the prices bid will therefore be more clear-cut when investors expect the Federal Reserve to start hiking interest rates.

Currencies Movements

The dollar index was up around 2.5% this year. Driving these gains for the greenback were upbeat macroeconomic data, combined with a loose monetary policy. 

Analysts have revised their forecasts for U.S. growth higher.  At the same time, they tend to revise down their forecasts for other countries.

USD/JPY was just off a nine-month high following Japan’s Q4 GDP’s revision to show quarterly growth of 2.8%. That is versus a preliminary 3.0% gain. 

GBP/USD added 0.4% to 1.3880, after hitting a three-week low of $1.3779 on Friday. The risk-sensitive AUD/USD pair also added 0.4% to 0.7680. NZD/USD added 0.01% to 0.7129.

The USD/CNY pair sank 0.05% to 6.5216. 

Meanwhile, the safe-haven Swiss franc softened to 0.9369 per dollar. This was its lowest level since late July. 

The Brazilian real fell to a ten-month low and the Turkish lira was down nearly 3% to its lowest level since mid-December. 

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