Dollar rises but traders expect strength to be short-lived

The dollar is up more than 1.5% against a basket of other major currencies since its recent low, confusing expectations of a fall in the greenback in 2021. Some investors and analysts expect that all vigor is short-lived.

The ICE US Dollar index rose to near 91 on Monday as the US stock and bond markets were closed, according to FactSet, from 89.4 on Jan.5, which was its lowest level since mid-April 2018.

The dollar rally comes as Janet Yellen, Joe Biden’s candidate for Treasury secretary, is expected to signal that the new administration will deviate from President Trump’s regular demands for a weaker dollar. The former Federal Reserve chief plans to affirm her commitment to market-determined exchange rates when she testifies at Senate hearings on Tuesday, the Wall Street Journal reported.

“It only rubs that doubt with investors” who have bet heavily against the dollar, said Jane Foley, head of currency strategy at Rabobank.

In the futures markets, investors bet on a falling dollar. Net bets against the dollar are almost as high as they were at the end of September, according to an analysis of data from the Royal Bank of Canada’s Commodity Futures Trading Commission, which was the most negative the market has been since April 2018.