Safe-haven dollar wallows near one-week low as bond yields retreat

By Kevin Buckland

TOKYO (Reuters) – The safe-haven dollar languished near a one-week low on Friday as calming bond markets lifted investor sentiment and appetite for Asian currencies.

The commodity-linked Australian and New Zealand dollars traded close to one-week highs reached overnight as inflation fears ebbed, sending Wall Street stocks to record highs.

Cryptocurrency bitcoin briefly rose above $58,000, approaching a record high.

The dollar index wallowed just north of the 91.364 level touched overnight for the first time since Feb. 4. It has dropped around 0.6% this week, after retreating from a more than three-month high of 92.506 reached Tuesday.

The gauge remains 1.6% higher this year as it tracked benchmark 10-year Treasury yields from below 1% to as high as 1.625% at the end of last week, before their retreat to around 1.5% currently.

A benign consumer price index reading this week helped allay fears that increased fiscal stimulus and sustained ultra-easy monetary policy could lead the U.S. recovery to overheat.

Weekly employment data overnight, meanwhile, added to positive signals from the jobs market, as President Joe Biden signed his $1.9 trillion pandemic relief bill into law.

“Risk sentiment is back in the ascendancy,” Ray Attrill, head of forex strategy at National Australia Bank (OTC:NABZY), wrote in a client note.

“A 1.5% rather than 1% risk-free rate is evidently no longer a problem for risk assets,” although for the dollar, “it still looks a bit premature to call a resumption of the 2020 downtrend with any degree of conviction.”

The Aussie traded at $0.77865, on the cusp of the one-week high of $0.7793 reached Thursday. New Zealand’s kiwi changed hands at $0.7223, near the one-week high of $0.7240 from overnight.

The euro also traded close to a one-week high of $1.1990.

On Thursday, the European Central Bank said it was ready to accelerate money-printing to keep eurozone yields down.

The dollar consolidated at around 108.60 yen, another safe-haven currency, after pulling back from a nine-month high of 109.235 reached on Tuesday.

Bitcoin last traded at $57,185.71, up more than 12% for the week, after topping $58,000 on Thursday for the first time since it set a record high at $58,354.14 on Feb. 21.