US dollar holds above three-year lows

London

THE US dollar held above three-year lows versus major peers on Thursday, as expectations for US President-elect Joe Biden's fiscal stimulus pushed yields of US government bonds higher.

The 10-year Treasury yield rose after CNN reported the stimulus will be around US$2 trillion, adding support for the US dollar.

In early European morning trading, the dollar index was little changed, up 0.04 per cent at 90.320, as investors waited for Mr Biden to give details later of a plan for "trillions" of US dollars in pandemic relief.

The US dollar has risen in four of the past five trading sessions as the prospect of more stimulus has weighed on US government bonds, sending the benchmark Treasury yield above 1 per cent for the first time since March.

Expectations are already running high for the stimulus, but many analysts believe the spending push has already been priced in.

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"We feel the fiscal cat is out of the bag already: it would take a lot to surprise markets after the re-pricing seen last week", ING analysts said. "The scope for the reflation trade to restart on the back of this announcement alone is limited."

Moreover, the currency's recent recovery is threatened by a build-up of bearish US dollar positions.

FX speculators have been net short the US dollar since mid-March, as investors' surging appetite for riskier assets hurt demand for the greenback.

Because US stimulus supports risk sentiment, it could weigh on the US dollar, which is considered a safe haven.

The euro slipped 0.05 per cent to US$1.214 after sliding 0.4 per cent on Wednesday. The US dollar advanced 0.13 per cent to 104.02 yen.

Bitcoin held on to 10 per cent gains made on Wednesday after sliding almost US$12,000 from last week's record high of US$42,000. It rose 3 per cent to US$38,860 on Thursday.

Interest in the cryptocurrency has been soaring as institutional investors began buying heavily, viewing it as both an inflation hedge and as exposed to gains if it becomes more widely adopted. REUTERS