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Dollar pares losses as reflation trade sends yields higher

Published 02/21/2021, 07:40 PM
Updated 02/22/2021, 04:25 AM
© Reuters. A U.S. Dollar banknote

© Reuters. A U.S. Dollar banknote

By Julien Ponthus

LONDON (Reuters) - The U.S. dollar pared losses in early European trading after hitting multi-year lows against sterling and the Australian and New Zealand currencies as vaccine progress, expectations for faster economic growth and inflation sent bond yields higher.

Yields on 10-year U.S. and German government bonds hit one-year and eight-month highs respectively as traders continued to play reflation trades.

The British pound was holding the $1.40 line after reaching 1.4043, its highest since April 2018, as Prime Minister Boris Johnson charts a path out of lockdowns on the back of rapid vaccinations.

The Aussie rose as much as 0.5% to an almost three-year high of $0.7908 before letting the dollar come back to 0.7864.

The kiwi hit $0.7338, also its best since early 2018, helped by S&P's upgrade of New Zealand's sovereign credit ratings by a notch, but also saw the greenback gradually pare most losses.

The yen lost 0.33% at 105.78 while the euro lost 0.2% at $1.2095 ahead of a German sentiment survey and a speech at 1345 GMT by European Central Bank President Christine Lagarde.

Commerzbank (DE:CBKG) analyst Ulrich Leuchtmann argued that much at stake for the relationship between the euro and the dollar lies in the growth differential between the two economies.

"Where EUR-USD is going to go medium-term depends on whether the U.S. economy really will be able to achieve a stronger post-lockdown boom than Europe", he said, adding he expects the common currency to suffer in that regard in the first half of 2021.

All in all, the U.S. dollar index was up 0.28% at 90.543.

In the cryptocurrency market, bitcoin eased from the record high of $58,354.14 hit during the weekend, retreating to $56,039.

© Reuters. A U.S. Dollar banknote

Latest comments

USD Index likely to move below 90 this week, possibly Wednesday which should allow PGM bulls more room to the upside. US stimulus certainty is going to push many shorts clear by middle of March. Keep on eye on the second multi-trillion dollar stimulus package to be announced soon after they pass the $1.9 trillion stimulus package. My bet is May 2021.
The dollar is the riskiest currency of them all. Get in gold and silver and BTC before it’s too late
Dollar destroyed itself due to inflation.
This is the funniest joke I've read on this site
You know it is possible to reverse inflation?
we can start producing snd selling cocaine and make it legal. Its a 1000% profit margin and a repeat customer base. We can start corner dispensaries and the dollar will recover
they know with ******Biden destroy America plan that the dollar is soon to be valued like a Weimar republic mark
Biden destroy? WoW! Before Biden sitdown check and open your eyes whats going on and ask your self Why?
Because they dont care about you
they know with *****Biden destroy America plan that the dollar is soon to be valued like a Weimar republic mark
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