Why the U.S. Dollar is Struggling to Gain Ground?

The U.S. dollar hovers near a one-month low to its main peers on April 19, with Treasury yields hovering near the lowest point in five weeks, following the U.S. Federal Reserve’s position. The central bank made it clear that any spike in inflation was likely to be temporary. Also, the greenback was held down by improved risk sentiment amid a rally in global stocks to record highs. The S&P 500 closed at a record high on April 16, prolonging a rally in global stocks. MSCI’s broadest gauge of world stocks held on Monday near Friday’s all-time high.

The dollar index was at 91.623 not far from the low of 91.484 recorded last week, a level not seen since March 18. This index tracks the dollar against six main rivals.

It was not a good day for the world’s reserve currency as it suffered losses against the yen. The greenback bought 108.655 yen, its worst result in several weeks.

The euro changed hands at $1.1958, near its highest point since March 4.

Wall Steet gains amid low volatility should keep USD rallies contained as well as attract further USD sellers.

Benchmark 10-year yields could decline to as low as 1.47% from around 1.57%.

Key technical points are 91.30, the March 18 low, when it comes to the dollar index, and $1.2000 for the euro, which could help to unleash a run to $1.22.

The 10-year Treasury yield dropped to as low as 1.5280% last week, from a more than one-year high of 1.7760% at the end of March, reducing the dollar’s appeal.

Dollar, yen, and bitcoin

Dollar net short positioning declined in the last week to the lowest point since June 2018. The current quarter is a period of consolidation in the U.S. yields as well as the dollar, with benchmark Treasury yields potentially declining below 1.5% and the greenback falling below 108 yen.

The general plan of President Joe Biden’s infrastructure spending plan has already been price in, but there is another factor. There will be modest progress in negotiations in the nearest future. Nonetheless, the uptrend, as well as the U.S. dollar, will start again in the third quarter, when Congress is likely to approve Biden’s plan.

Bitcoin on April 19 remained well below the record high of $64,895.22 reached on April 14 after its weekend plunge. In spite of recent weakness, bitcoin remains up 97% in 2021, after more than quadrupling last year.