FOREX-Dollar index in fourth straight session of gains; Aussie picks up

Reuters

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    * Dollar index touches one-month high
    * Aussie dollar edges up
    * Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

 (Updates prices, adds detail and commentary)
    By Elizabeth Howcroft
    LONDON, March 2 (Reuters) - The dollar was up for a fourth
consecutive day on Tuesday, after a recent spike in bond yields
challenged the market consensus for dollar weakness in 2021, but
riskier currencies rose as bond markets calmed and stocks
recovered.
    Rising yields have spooked markets in recent weeks, with
participants worried that an economic recovery from the impact
of COVID-19, combined with fiscal stimulus, could cause a jump
in inflation from pent-up consumer demand when lockdowns end.
    But market sentiment has improved and riskier currencies
have recovered this week as the bond market calmed.
    At 1242 GMT, the dollar index was up 0.1% on the day at
91.13  =USD . It hit a one-month high earlier in the session.
    The Swiss franc hit its lowest since November 2020 against
the dollar  CHF=EBS . Dollar-Swiss has been rising since early
January and gained some 3.7% so far in 2021.    
    It is the short end of the yield curve that has particularly
affected the dollar, said Jane Foley, head of FX strategy at
Rabobank.
    "The market is in two minds at the moment and there’s a bit
of a pull and push between these two stories," she said.
    "One story is that the Fed’s going to keep interest rates
low forever and therefore we’re going to have this movement into
higher yield, and the other story is actually no Fed rates won’t
be as low forever, in fact the Fed could be one of the first
central banks to hike."
    Riskier currencies including the Australian and New Zealand
dollars recovered some recent losses on Monday.
    The Australian dollar was down 0.4% at 0.7797 versus the
U.S. dollar  AUD=D4  at 1243 GMT, after the Reserve Bank of
Australia re-committed to keeping interest rates at historic
lows.  urn:newsml:reuters.com:*:nL3N2L00DC
    "We continue to believe, though, that the strengthening
global recovery boosted by continued loose monetary and fiscal
policies will remain supportive for higher commodity prices and
a stronger Australian dollar in the year ahead," wrote MUFG
currency analyst, Lee Hardman.
    The New Zealand dollar was down around 0.1%, at 0.7261
versus the U.S. dollar  NZD=D3 .
    The euro fell, after top European Central Bank officials
sounded alarm over the rises in bond yields.
    Policymaker Francois Villeroy de Galhau said on Tuesday that
some of the recent rises were unwarranted and that the ECB must
push back using the flexibility embedded in its bond purchase
programme.  urn:newsml:reuters.com:*:nL5N2KZ5XK
    ECB Vice President Luis de Guindos said the ECB had the
flexibility to counter any undesired rise in yields.
 urn:newsml:reuters.com:*:nL5N2L01RT
    Market participants said that the ECB and the U.S. Federal
Reserve were taking divergent tones on rising bond yields, with
the Fed appearing less concerned.  urn:newsml:reuters.com:*:nL1N2KV2NV
    At 1245 GMT, the euro was down 0.2% at $1.20295, having hit
its lowest in nearly a month earlier in the session  EUR=EBS .
    Euro zone inflation held steady as expected last month,
taking a break in what is likely to be a temporary but sharp
spike in consumer prices in the coming months, data showed.
 urn:newsml:reuters.com:*:nL5N2L02SL
    Overnight, China's banking and insurance regulator expressed
wariness of the risk of bubbles bursting in foreign markets, and
said Beijing is studying measures to manage capital inflows to
prevent turbulence in the domestic market.  urn:newsml:reuters.com:*:nB9N2K800O
    The U.S. Senate will start debating President Joe Biden's
$1.9 trillion coronavirus relief bill this week, Senate Majority
Leader Chuck Schumer said on Saturday.
    Elsewhere, bitcoin was a touch lower, down 1.7% at around
$48,804 at 1248 GMT, having recovered some recent losses in the
previous session, with Citi saying the popular cryptocurrency
was at a "tipping point" and could become the preferred currency
for international trade  BTC=BTSP .  urn:newsml:reuters.com:*:nL5N2KZ307

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World FX rates    https://tmsnrt.rs/2RBWI5E
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 (Reporting by Elizabeth Howcroft; editing by John Stonestreet,
William Maclean)
 ((Elizabeth.Howcroft@thomsonreuters.com; +44 02075427104;))

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