The dollar index traded at 90.427, near last week’s low of 90.249 – a level not seen since Jan. 27
The dollar started the week near two-week lows on Monday as traders considered whether the recovery from the pandemic in the US would be fast enough.
Bitcoin traded below $49,000 after hitting a record high of $49,714.66 over the weekend, following investments by Tesla and BNY Mellon last week.
In a level not seen since Jan. 27, the dollar index sat at 90.427, near last week’s low of 90.249.
The gauge hit a two-month top of 91.6 on Feb. 5 on hopes that a U.S. rebound would outpace other major economies, but retreated on disappointing U.S. employment data.
The rebound in the dollar was initiated by relative U.S. economic outperformance, or expectations thereof, said Shinichiro Kadota, senior currency strategist at Barclays Capital in Tokyo. Now the market is looking for actual evidence that the U.S. economy is outperforming.
The economic data needs to improve, he said.
The euro was flat at $1.21215 after rising 0.6% last week.
The dollar was 0.2% higher to 105.09 yen, as it recovered from the previous week’s 0.4% loss.
Financial markets in Asia were closed on Monday for Lunar New Year, while U.S. markets remained closed for Presidents Day.
There has been an uncertainty over the dollar this year as some market participants expected it to strengthen as the U.S. economy outpaces world’s leading economies.
Others view the U.S. recovery as a key driver in a global reflation narrative that should lift riskier assets at the dollar’s expense.
The U.S. outperformance story has a lot further to run thanks to fiscal stimulus and faster vaccine deployment, Westpac strategists wrote in a client note.
But ongoing aggressive U.S. reflationary fiscal and monetary policy settings will leave DXY on a sustained medium-term bear trend, the note said, referring to the dollar index.
Bitcoin was also little changed from its record high, last trading at $48,772. It was the best performance by the crypto currency since the beginning of the year as it surged roughly 25% last week.
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