There are many currencies in the world, but the U.S. dollar is the most recognizable currency. Interestingly, the dollar was up for a fourth consecutive day on March 2, after a recent spike in bond yields challenged the market consensus for dollar weakness in 2021. However, riskier currencies rose as bond markets calmed as well as stocks recovered.
As a reminder, rising yields have frightened 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 demand when lockdowns end.
It is worth noting that, market sentiment improved and riskier currencies recovered this week as the bond market calmed.
Interestingly, at 12:52 GMT, the dollar index was up 0.1% on the day at 91.13. It reached a one-month high earlier in the session.
Dollar and other currencies
It is worth noting that, the Swiss franc fell to the lowest level since November 2020 against the dollar. As a reminder, the dollar-franc has been rising since early January and added some 3.7% so far in 2021.
Importantly, it is the short yield curve that particularly affected the greenback. People should keep in mind that, the market is in two minds at the moment. Moreover, there is a bit of a pull and push between these two stories.
Interestingly, one story is that the Fed’s going to keep interest rates low forever. As a result, we are going to have this movement into a higher yield. Furthermore, the other story is actually no Fed rates won’t stay as low as they are forever, in fact, the Fed could be one of the central banks to change the rates.
Riskier currencies including Australian and New Zealand dollars recovered some recent losses on March 1.
People should keep in mind that, the Australian dollar fell 0.4% at 0.7797 versus the U.S. dollar at 12:43 GMT, after the Reserve Bank of Australia re-committed to keeping interest rates at historic lows.
Interestingly, the New Zealand dollar declined around 0.1%, at 0.7261 versus the greenback.
The euro declined after top European Central Bank officials sounded alarm over the rises in bond yields. According to ECB Vice President Luis de Guindos, the central bank has the flexibility to counter any undesired rise in yields. Last but not least, at 12:45 GMT, the euro was down 0.2% at $1.20295. It fell to the lowest level against the dollar in almost a month earlier in the session.