The dollar was pinned near a one-month low to major peers on Monday, with Treasury yields hovering near the lowest in five weeks, after the U.S. Federal Reserve reiterated its view that any spike in inflation was likely to be temporary.
The safe-haven greenback was also held down by improved risk sentiment amid a rally in global stocks to record highs.
Bitcoin nursed losses from Sunday, when it plunged by as much as 14% to $51,541. It last traded around $57,020.
The dollar index, which tracks the currency against six rivals, was at 91.623, not far from the low of 91.484 marked last week, a level not seen since March 18.
The greenback bought 108.655 yen, near the lowest since March 24.
The euro changed hands at $1.1958, near the highest since March 4.
“The fixed-income market will dominate my world this week,” with the risk currently skewed to further U.S. yield declines, pressuring the dollar, Chris Weston, head of research at Pepperstone Markets Ltd, a foreign exchange broker based in Melbourne, wrote in a client note.
Wall Street’s gains amid low volatility “should keep USD rallies contained and attract further USD sellers,” he wrote.
Benchmark 10-year yields could fall to as low as 1.47%, from around 1.57% currently, according to Weston.
Key technical points are 91.30, the March 18 low, for the dollar index, and $1.2000 for the euro, which could trigger a run to $1.22, he said.
The 10-year Treasury yield sank to as low as 1.5280% last week, from a more-than-one-year high of 1.7760% at the end of last month, reducing the dollar’s appeal.
The S&P 500 closed at a record high on Friday, extending a rally in global stocks. MSCI’s broadest gauge of world stocks held on Monday near Friday’s all-time peak.
Fed Governor Christopher Waller said on CNBC on Friday that the U.S. economy “is ready to rip” as vaccinations continue and activity picks up, but a rise in inflation is likely to be transitory, echoing comments from other Fed officials including Chair Jerome Powell over the past week.
Dollar net short positioning fell in the latest week to the lowest level since June 2018, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday.
The chief currency strategist at Mizuho Securities in Tokyo, Masafumi Yamamoto, sees the current quarter as a period of consolidation in U.S. yields and the dollar, with the benchmark Treasury yield potentially dropping below 1.5% and the dollar weakening below 108 yen.
The outline of President Joe Biden’s infrastructure spending plan has already been priced in, and there will be limited progress in negotiations in the near term, Yamamoto said.
But the uptrend in U.S. yields and the dollar will resume in the third quarter, when Congress is likely to approve the plan, the U.S. vaccine rollout will be far along and market speculation about a tapering of Fed stimulus will be mounting, he said.
Bitcoin on Monday remained well below the record high of $64,895.22 reached on April 14 following its weekend plunge.
Data website CoinMarketCap cited a blackout in China’s Xinjiang region, which reportedly powers a lot of bitcoin mining, for Sunday’s selloff.
Analysts at National Australia Bank cited “speculation in several online reports” that the U.S. Treasury may crack down on money laundering within digital currencies for the sharp move lower.
The bitcoin rout also followed a decision on Friday by Turkey’s central bank to ban the use of cryptocurrencies for purchases.
Despite recent weakness, the world’s most popular cryptocurrency remains up 97% in 2021, after more than quadrupling last year.
Mizuho’s Yamamoto also pointed to regulatory concerns as the likely trigger for the weekend selloff, but doesn’t expect those jitters to scupper the rally longer term.
“I would say the bigger trend for bitcoin has been the increased use by big financial institutions and corporates like Tesla,” he said. “I think a new record high is reachable in the coming weeks.”
Currency bid prices at 521 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
$1.1959 $1.1983 -0.20% -2.12% +1.1978 +1.1943
108.6550 108.8100 -0.13% +5.20% +108.8200 +108.5900
129.95 130.34 -0.30% +2.39% +130.3200 +129.7100
0.9208 0.9201 +0.10% +4.10% +0.9215 +0.9205
1.3855 1.3850 +0.03% +1.40% +1.3857 +1.3811
1.2506 1.2510 -0.01% -1.77% +1.2527 +1.2505
0.7731 0.7734 -0.03% +0.51% +0.7737 +0.7706
Dollar/Dollar 0.7140 0.7148 -0.10% -0.57% +0.7143 +0.7117
Tokyo Forex market info from BOJ
Editing by Muralikumar Anantharaman and Jacqueline Wong