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Dollar Down but Reaches One-Year High Against Yen as Inflation Fears Rise

ForexMar 29, 2021 10:22PM ET
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By Gina Lee – The dollar was down on Tuesday morning in Asia but reached a one-year high against the yen on Tuesday with climbing Treasury yields, the quickening U.S. COVID-19 vaccination rollout and massive U.S. stimulus measures all flaming inflation concerns.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.03% to 92.927 by 10:14 PM ET (2:14 AM GMT), staying near a four-and-a-half month high of 92.964 reached on Monday. The USD/JPY pair edged up 0.11% to 109.91.

The AUD/USD pair edged up 0.18% to 0.7644 and the NZD/USD pair edged up 0.20% to 0.7011.

The USD/CNY pair inched up 0.05% to 6.5714, ahead of China’s release of its manufacturing and non-manufacturing Purchasing Managers Indexes (PMIs) on Wednesday.

The GBP/USD pair inched up 0.10% to 1.3773.

Investor worries about the market impact of Achegos Capital’s collapse also gave the safe-haven U.S. currency a boost, although worries seemed to have died down by the time Asian trading got underway on Tuesday.

The dollar traded as high as 109.89 against the yen on Tuesday, its highest level since March 2020. Also helping the greenback on the path to its best month since 2016 is the dollar demand from Japan, as companies begin to square their books at the end of Japan’s fiscal year this week.

In Europe, the short-term economic outlook became gloomier as France and Germany introduced tougher restrictive measures to curb a third wave of COVID-19 cases on the continent. Also applying pressure on the euro was the widening spread between U.S. and German bond yields.

The euro remained near the four-and-a-half month low reached on Monday, with March 2021’s decline set to the biggest since mid-2019.

On the data front, the U.S. employment report for March, including non-farm payrolls, will be released on Friday and closely watched for signs of economic recovery. The Federal Reserve has cited the labor market’s slow recovery from COVID-19 as a reason for its dovish stance on interest rates.

Some investors were cautiously optimistic.

"In a week when the market is feeling so optimistic about the forthcoming payrolls release, it seems very likely that the greenback will find strong support," with the dollar index looking to test 93, Rabobank currency strategist Jane Foley said in a note.

However, "the market is in danger of pricing in too much inflation risk," meaning "we see scope for the dollar to soften in the months ahead," the note added.

Meanwhile, Visa Inc . (NYSE:V) will now allow the use of cryptocurrencies to settle transactions on its payment network. The company’s decision pushed bitcoin back near the $57,620 mark on Tuesday, after touching a record $61,781.83 earlier in March.

Dollar Down but Reaches One-Year High Against Yen as Inflation Fears Rise

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