Dollar firm amid US yield spike; bitcoin back below $60,000

Tokyo - Bitcoin retreated to below $60,000 amid a report that India will push ahead on a proposal to ban cryptocurrencies.

By Reuters

Published: Mon 15 Mar 2021, 8:26 AM

The US dollar held firm on Monday after bouncing off a one-week low last week, supported by a spike in benchmark Treasury yields to more-than-one-year highs as inflation fears continued to smoulder.

Bitcoin retreated to below $60,000 amid a Reuters report that India will push ahead on a proposal to ban cryptocurrencies. It had surged to a record $61,781.83 over the weekend.

The greenback traded near its highest since June against the Japanese yen, which tends to weaken when Treasury yields rise.

Market participants have grown wary in recent weeks that massive fiscal stimulus and pent-up consumer demand could lead to a jump in inflation as expanding vaccination campaigns bring an end to lockdowns.

US producer prices had their largest annual gain in nearly 2-1/2 years, data showed on Friday, while the country’s economy is set to get a massive shot in the arm from President Joe Biden’s $1.9 trillion stimulus package.

The outlook for the already brisk pace of US vaccinations has also been boosted by Biden’s order for every state to make all adults eligible for vaccination by May 1.

The dollar index, which tracks the US currency against six major peers, held around 91.645 early in Monday’s Asia session after climbing from near a one-week low of 91.364 at the end of last week.

Benchmark 10-year Treasury yields were at 1.6282 per cent on Monday, close to Friday’s top of 1.6420 per cent.

The dollar was largely flat at 109.04 yen on Monday, near the nine-month top of 109.235 reached last week.

The greenback has also been supported by a paring of bets for its decline, with speculators cutting net short positions to the lowest since mid-November in the week ended March 9, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

The dollar index has gained 1.8 per cent this year, tracking the rise in benchmark yields from below 1 per cent. In 2020, the gauge fell nearly 7 per cent.

Many analysts expect the dollar to resume that downtrend in due course.

“Higher bond yields alone are unlikely to sustain the upswing in USD,” Commonwealth Bank of Australia analysts wrote in a research note, adding dollar declines were coming “soon”.

“The move higher in bond yields largely reflects the better economic outlook, which is ultimately a weight on the USD.”

The euro was mostly unchanged at $1.19535, consolidating just below $1.20 after sliding to a three-month trough of $1.18355 last week.

The Australian dollar - viewed widely as a liquid proxy for risk appetite - rose slightly to $0.7769, paring some of Friday’s 0.4 per cent loss.

The Canadian dollar was largely flat, after earlier strengthening to C$1.2461 for the first time in three years. On Friday, a bigger-than-expected domestic jobs gain supported the view that the Bank of Canada would reduce quantitative easing purchases next month.

Bitcoin changed hands at around $59,940 after Reuters cited a senior government official as saying India will propose a law banning cryptocurrencies and fining anyone trading in the country or even holding such digital assets.

It would be one of the world’s strictest policies against the red-hot digital assets, and comes just as bitcoin and its rivals have been gaining credibility amid a wave of endorsements from big investors such as BlackRock Inc and corporate leaders including Tesla Inc’s Elon Musk and Twitter Inc’s Jack Dorsey.

Bitcoin has more than doubled in value this year, after more than quadrupling in 2020.

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