US dollar drops as traders await inflation data


THE US dollar slipped on Monday towards a three-week low as Treasury yields traded near recent lows and traders awaited crucial US inflation and retail sales data in the coming days.

Elsewhere, it was a quiet start to a data-heavy week for foreign exchange markets. The euro climbed back above US$1.19 while the British pound rebounded from a two-month low.

The dollar's performance has been tied to US Treasury yields for most of 2021, after concern about rising inflation in the United States and a stimulus-fuelled economic rebound triggered a jump in Treasury yields in February.

A fall in US yields last week triggered the worst week for the dollar in 2021. With yields inching lower on Monday, it was back under pressure.

Federal Reserve Chairman Jerome Powell said in a US media interview released on April 11 that the US economy was at "an inflection point" and looked set for a strong rebound in the coming months, but he also warned of risks stemming from a hasty re-opening.

Investors are now waiting for US March inflation data due on Tuesday.

"We are set to see the first evidence of the much anticipated surge in inflation that is widely expected through the coming months as base effects from a year ago begin to take effect as the sharp declines post-Covid start to fall out of the annual calculations," MUFG analysts said.

They said the dollar's fortunes could well "remain linked to 10-year yields".

The benchmark 10-year Treasury yield was at 1.664 per cent after dropping to as low as 1.6170 per cent last week. It had surged to a more than one-year high of 1.7760 per cent on March 30.

The dollar index, which measures the US currency against a basket of currencies, weakened 0.2 per cent to 92.03. The euro initially dropped but later recovered and was up 0.1 per cent to US$1.1915 .

Bitcoin traded above US$60,000, closing the gap to its record high.

Against the pound, the dollar initially gained before reversing course. The British currency was last up 0.5 per cent at US$1.3763 after briefly touching a two-month low of US$1.3669 as traders cheered the latest phase of the government's economic reopening plan.

The dollar fell 0.3 per cent to 109.33 yen versus the Japanese currency. REUTERS


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