The U.S. dollar gained popularity many decades ago, and it retains the status of the most important currency in the world. Interestingly, the dollar reached a one-year high against the yen on Tuesday amid a spike in Treasury yields, as accelerating vaccinations and massive stimulus in the U.S. exhilarated inflation concerns.
Moreover, the safe-haven greenback from another factor as well. The world’s reserve currency found support as investors worried about the potential fallout from the collapse of a hedge fund, identified as Archegos Capital. However, those jitters eased as the Asian trading day got underway.
The world’s reserve currency rose to a cusp of 110 yen in Asia. a level not seen since March of 2020. Interestingly, it is on track for the best month since late 2016. Importantly, the end of Japan’s fiscal year this month is increasing demand for the greenback as companies seek to square their books.
Importantly, the benchmark 10-year Treasury yields reached as high as 1.7450% in Asia, approaching the 14-month high of 1.7540% touched earlier this month. Moreover, the five-year note’s yield pushed as high as 0.9170% for the first time since March of last year.
It is worth noting that, higher yields make a currency more attractive as an investment.
Dollar, and the euro’s problems
People should keep in mind that, the euro languished near the 4-½ month low of $1.1763 reached on Monday. Furthermore, the euro is on track to fall by the most this month since mid-2019.
Importantly, tougher coronavirus curbs in France and Germany affected the short-term outlook for the European economy. Interestingly, a widening spread between the U.S. and German bond yields are increasing pressure on the euro.
Interestingly, the dollar index hovered near a 4-½ month high of 92.964 reached on Monday.
As a reminder, investors and analysts are waiting for the monthly U.S. non-farm payrolls report. Moreover, President Joe Biden will outline on Wednesday how he would pay for a $3 trillion to $4 trillion plan. The purpose of this plan is to improve the country’s infrastructure.
Governments around the world are struggling to deal with various challenges. Hopefully, they are working hard to cope with the coronavirus pandemic. Nevertheless, it would take time and effort to improve the situation in a short period of time. Governmental and private organizations should join forces to support the companies.