Dollar Declined Against Most Currencies

It was not an easy day for the U.S. dollar as it sustained losses against most currencies on March 11, after benign data on the U.S. consumer price index as well as a decline in Treasury yields forced some investors to cut bets on a rapid acceleration in inflation.

Unsurprisingly, the euro was in focus ahead of a European Central Bank meeting later on Thursday. Interestingly, there is a high chance that policymakers will send a signal that they will restrain bond yields from rising further and damaging the bloc’s economic outlook.

Interestingly, the sentiment for the dollar remains fairly positive as the country’s economy is recovering from the pandemic. Furthermore, President Joe Biden’s $1.9 trillion stimulus bill has won final approval in Congress. It means any further declines in the dollar are likely temporary.

People should keep in mind that, the dollar is the dominant theme in the currency market. Importantly, this is just a temporary pause in its uptrend.

The British pound bought $1.3933 after rising 0.3% on March 10.

Furthermore, the dollar traded at 108.37 yen, extending a pullback from a nine-month high reached on Tuesday.

Moreover, against the safe-harbor Swiss franc, the greenback bought 0.9297.

U.S. dollar and main findings

It is worth mentioning that U.S. core consumer prices rose 1.3% year-on-year in February. This result represents a slight slowdown from a 1.4% annual increase in the previous month.

Interestingly, the dollar, as well as the U.S. Treasury yields, have been rising steadily due to the Federal Reserve. More precisely, due to expectations that the Fed’s loose monetary policy and fiscal stimulus will stoke inflation. However, subdued price data took some momentum away from the greenback.

Furthermore, investors are closely watching an auction of 30-year Treasuries later on March 11. This auction will be an important test for the demand for new debt.

As a reminder, an auction of 10-year Treasuries on Wednesday was successful, thanks to sufficient demand. As a result, it helped to alleviate concerns about investors’ ability to absorb an increase in debt needed to finance the response to the coronavirus. It is no secret that the pandemic created a lot of problems and it would take time to return to pre-coronavirus results. Many governments are willing to do whatever it takes to deal with challenges.

Moreover, if future auctions also draw acceptable demand this would be another positive factor for the dollar.