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Dollar pares losses as reflation trade sends yields higher

ForexFeb 22, 2021 04:25AM ET
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© 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.

Dollar pares losses as reflation trade sends yields higher
 

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Comments (5)
AIM Investor Journal
AIM Investor Journal Feb 22, 2021 4:45PM ET
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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 Chad Bull
The Chad Bull Feb 21, 2021 10:46PM ET
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The dollar is the riskiest currency of them all. Get in gold and silver and BTC before it’s too late
Ola Mai
Ola Mai Feb 21, 2021 10:26PM ET
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Dollar destroyed itself due to inflation.
Art Fire
Art Fire Feb 21, 2021 10:26PM ET
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This is the funniest joke I've read on this site
Pin ga
Pin ga Feb 21, 2021 10:26PM ET
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You know it is possible to reverse inflation?
Joe Messeri
Joe Messeri Feb 21, 2021 10:26PM ET
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Pin ga 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
JR Pierce
JR Pierce Feb 21, 2021 10:17PM ET
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they know with ******Biden destroy America plan that the dollar is soon to be valued like a Weimar republic mark
Allan De Guzman
Allan De Guzman Feb 21, 2021 10:17PM ET
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Biden destroy? WoW! Before Biden sitdown check and open your eyes whats going on and ask your self Why?
Ruja Torres
Ruja Torres Feb 21, 2021 10:17PM ET
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Allan De Guzman Because they dont care about you
JR Pierce
JR Pierce Feb 21, 2021 10:17PM ET
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they know with *****Biden destroy America plan that the dollar is soon to be valued like a Weimar republic mark
 
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