The US dollar recovered from an almost three-week low against its main competitors on the back of higher yields on US Treasury bonds and in anticipation of inflation data. Thus, the euro/dollar pair dipped to $1.1901 from the previous close of $1.1909 per euro. The value of the US dollar against the yen rose to 109.34 from the previous level of 109.37. At the time of preparing this material, the US dollar index, measuring the value of the dollar against a basket of six world currencies, was up by 0.02% to 92.13, pulling back from the lowest reading of 91.995 since March 23. Notably, last week, USDX hit an almost five-month top at 93.439.
Earlier, the US dollar exchange rate declined simultaneously with the yield on US Treasury bonds after a strong upward movement. This rally was largely due to investors' expectations of massive fiscal stimulus and continued monetary policy easing.
On Monday, Federal Reserve Bank of Boston President Eric Rosengren commented on the US economic situation. He suggested that the US economy could see a significant rebound as early as 2021 thanks to Fed's accommodative monetary and fiscal policy. However, the labor market still has much room for improvement, Rosengren added.
Strategists at Westpac, one of Australia's largest banks, predict that the US dollar will finally see stable gains and advance to 94,500 amid better macroeconomic indicators to be released this week. According to preliminary data, consumer prices in the United States rose by 2.5% on an annual basis and by 0.5% on a monthly basis.
At the same time, analysts at Westpac expect the yield on 10-year Treasury bonds to rise towards the top of its recent 1.6-1.755% range this week. Today, the yield has been up 2 basis points to 1.6926%, still well below 1.7760%, the highest level of the previous year, last seen on March 30, 2021. A factor which could trigger a rise in yields this week is the 30-year Treasury bond sale scheduled for Tuesday.
Jane Foley, a senior currency strategist at Dutch bank Rabobank, is confident that the near-term dynamics of the greenback will depend both on the reaction of Treasury bond yields to the news of the 30-year bond sale, as well as on US statistics. Foley believes that the value of the US currency against the euro will fluctuate in the range of $1.17– $1.20.
JPMorgan analyst Meera Pandit is convinced that both the yield on US Treasury bonds and the exchange rate of the US currency will continue to rise.