The dollar rose higher on Tuesday, assisted by a pick-up in the US Treasury yields, but was still near three-week lows when the market was waiting for inflation data in the United States. The dollar has fallen so far in April, after surging in the first three months of 2021 concerning expectations that the combination of monetary stimulus and government expenditure would cause a surge in inflation.
The CPI data for March is due on Tuesday and is expected to increase inflation to 2.4%. Market participants will also be paying attention to how the treasury yields react to the 30-year Treasury auction.
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Strategists in IND wrote in notes to clients that higher inflation would support higher US yields, which could cause the dollar to outperform lower currencies such as the Yen, Swiss, and Euro Francs. Inflation data “must trigger the narrative that American economy start is too hot and the possibility of adding fears that a strong Fed message will be more challenged,” said.
At 0725 GMT, the dollar rose 0.1% against a basket of currencies, at 92.201, moving from a three-week low recently. The 10-year Treasury yields were at 6979% for the third consecutive advantage day, but still far below the level of 1.7760% on March 30, which was the highest in more than a year.
“There is hope that the inflation is set to increase in the coming months, but also consensus for the most part that this would be a temporary phenomenon,” Bank Deutsche’s strategy Jim Reid wrote a note. The last night data showed China’s exports rose in March, with increased growth of a four-year high, indicating an increase in global demand.
Asian stock markets are widely positive after data, but the urge does not support the currency market. At the beginning of London’s trade, Yuan China fell 0.1% against the dollar, changing hands at 6.5523. The euro fell 0.1%, at $1.1895. The Australian dollar, which was seen as a liquid proxy for risk appetite, fell 0.2% versus the US dollar at 0.7609.
On Monday, Australia abandoned its ambition to inoculate almost all of its population by the end of 2021. The New Zealand dollar also fell, down 0.1%. Reserve Bank of New Zealand will meet on Wednesday and is expected to maintain the rates constant.
The British pound rose 0.1% against the dollar at $1.3763. In February, the British economy grew when the country started lifting its coronavirus restriction, gross domestic product data showed. Elsewhere, Bitcoin rose 1.6% at $60,807.77, ahead of the global Coinbase listing in Nasdaq on Wednesday.
