Dollar extends rebound as investors await details of US stimulus, bitcoin rebounds

TOKYO (Reuters) – The dollar extended its nearly three-year rebound against its major peers on Thursday, supported by higher U.S. yields, as President-elect Joe Biden prepared to lay out his massive fiscal stimulus plans.

The dollar index held onto the gains made Wednesday at the start of Asian trading as investors continued to unwind bearish bets. The dollar has risen in four of the past five trading sessions as the prospect of further stimulus weighed on U.S. government bonds, pushing the benchmark Treasury yield above 1% for the first times since March.

Bitcoin also held onto the 10% gains made on Wednesday, rebounding after slipping nearly $ 12,000 from a historic high of $ 42,000 reached last week.

Biden will give details Thursday of a “trillion” dollar pandemic relief plan. The 10-year Treasury yield rose after CNN announced the package would be around $ 2 trillion, adding support for the dollar.

However, many analysts expect the currency’s rebound to be temporary as an accumulation of bearish positions in the dollar is shaken.

Longer term, they expect more US stimulus to support risk sentiment weighing on the greenback, which has traditionally been viewed as a safe haven.

“I think positioning in risky assets is becoming a concern, so there could be a tightening in the dollar in the short term,” said Shusuke Yamada, chief Japanese currency strategist at Bank of America in Tokyo.

“I am focusing on the gradual weakness of the dollar in 2021.”

Currency speculators have been sharply short on the dollar since mid-March, as growing investor appetite for riskier assets has hurt demand for the greenback.

The dollar index added 0.1% to 90.431 after gaining 0.3% overnight. It fell to 89.206 on January 6 for the first time since March 2018.

The euro slipped 0.1% to $ 1.21405 after slipping 0.4% on Wednesday.

The greenback rose 0.2% to 104.075 yen, adding to a previously 0.1% gain.

Bitcoin was little changed at $ 37,420 on Thursday, from $ 30,261.13 on January 11.

Interest in the cryptocurrency exploded as institutional investors began to buy heavily, seeing it both as a hedge against inflation and as prone to gains if it became more widely adopted.

“This rushed sell-off that we’ve seen recently was largely driven by the futures markets,” where positions became over-fished and the resulting margin calls put downward pressure on the price of bitcoin , said Seth Melamed, Tokyo-based director of operations. Liquid cryptocurrency exchange.

“In the spot markets, you only see this constant buying pace.”