Dollar Up; U.S. Growth Profile Looking Good

The dollar climbed higher in early European forex trade on Tuesday, gaining from signs of impressive U.S. economic growth and vaccine rollout. 

The Dollar Index added 0.1% at 92.688 at 2:55 AM ET (0755 GMT), while USD/JPY also added 0.1% at 110.31

On the other hand, GBP/USD lost 0.1% at 1.3885, while the risk-sensitive AUD/USD shed 0.2% at 0.7634. This came after Australia’s central bank kept its key policy instruments unchanged onTuesday. 

On Monday, Germany announced plans to have 20% of its population immunized against COVID-19 by early May.  In percentage terms, though, that  would still put the European Union’s largest country way behind the United States. 

In addition, the data coming out of the U.S. indicates a sharp economic recovery. That’s with the Institute for Supply Management services index rising on Monday, after Friday’s stellar jobs report. The European Union was facing recession, with the lockdowns associated with the third wave of the pandemic.

 At 10 AM ET (1400 GMT) on Tuesday, U.S. job openings for February were released. Analysts were expecting a reading of 6.99 million, which would be up from 6.917 million the prior month.

Elsewhere, USD/CNY slid 0.2% to 6.5490. Data showed that the recovery in China’s services sector picked up speed in March. This was as firms hired more workers and business optimism surged that month.

Rising to 54.3 was the Caixin/Markit services Purchasing Managers’ Index, its highest since December, from 51.5 in February. It’s also well above the 50-mark that separates growth from contraction on a monthly basis.

Dollar on Back Foot as U.S. Yields Drop

The yen continued to bounce back from a more than one-year low near 111 per dollar. The Japanese currency was briefly strengthening back below 110 on Tuesday. 

The euro extended its rise from a nearly five-month trough near $1.17 to trade as high as $1.1821.

Benchmark 10-year Treasury yields continued to drop Tuesday, falling below 1.7% in the early Asian session. It came from a peak of 1.776% last week, a level not seen since January 2020.

That was despite a strong economic outlook that boosted U.S. stocks to record highs.

Westpac strategists, however, see room for further dollar gains. They said the run of strong data cement the USD’s unbeatable growth rebound credentials. 

Referring to the dollar index, the strategists wrote that DXY has not capitalised on the strong macro tailwinds.

Pullbacks into 92 should be bought for a run to the 2020 third-quarter highs around 94.50, they added.