Dollar edges higher as virus restrictions unnerve investors

imageEconomy5 hours ago (May 17, 2021 15:55)

© Reuters. FILE PHOTO: An employee of the Korea Exchange Bank counts one hundred U.S. dollar notes during a photo opportunity at the bank’s headquarters in Seoul April 28, 2010. REUTERS/Jo Yong-Hak

By Stephen Culp

NEW YORK (Reuters) – The dollar on Monday held steady near recent lows as new restrictions in Asia to contain COVID-19 and mixed economic signals from China supported safe-haven currencies, while bitcoin extended its slide.

The steady U.S. 10-year Treasury yield, along with new outbreaks in Singapore and Taiwan provided some support the dollar against a basket of rival currencies.

Still, the greenback is struggling to gain momentum.

“The U.S. dollar is lacking the support from yields that it needs to turn this weakness around,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto. “For the summer and into the Fall the U.S. dollar is likely to stay soft.”

The dollar index was last down 0.04% at 90.247. The euro gained 0.02% to $1.2149 and the dollar fell 0.16% to 109.155 Japanese yen.

Bitcoin dropped to a three-month low after Tesla Inc boss Elon Musk suggested over the weekend that the electric automaker may have already sold some of its holdings in the digital currency.

The U.S. Federal Reserve is expected to release the minutes from its April monetary policy on Wednesday, which market participants will scrutinize for clues regarding the central bank’s thinking about inflation spikes and the ongoing economic recovery.

“Last week a whole range of Fed speakers were downplaying inflation, stating that it’s temporary, that will not deflect the Fed’s course and now is not the time to start discussing reducing support to the economy,” Osborne added. “We’re not likely to see change in Fed policy for quite some time.”

Still, resurgent demand combined with supply shortages has put commodity prices on an upward trajectory.

Strengthening prices for metals and crude oil have supported commodity-sensitive currencies. The Canadian dollar, the Australian dollar and the Norwegian crown all gained against the U.S. dollar.

“The current environment of low interest rates, low volatility and increasing commodity prices should be good for the commodity currencies,” Osbourne added.

Dollar essentially unchanged as Treasury yields hold steady

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