LONDON (Reuters) – The dollar rose on Tuesday, helped by a rise in US Treasury yields, but was still close to three-week lows as markets waited for US inflation data.
The dollar has fallen so far in April, after rising in the first three months of 2021 on expectations that a combination of monetary stimulus and government spending would drive up inflation.
US CPI data for March is forecast at 1330 GMT and is expected to show an increase in inflation to 2.4%.
Market participants will also pay attention to how yields react to a 30-year treasury auction.
ING Strategies wrote in a note to clients that higher inflation would support higher US yields, which in turn could cause the dollar to outperform lower-yielding currencies such as the yen, Swiss franc and euro.
Inflation data “should further fuel the narrative that the US economy is beginning to overheat and is likely to add to concerns that the Fed’s firmly linked message will be increasingly challenged,” ING said.
At 0725 GMT, the dollar rose 0.1% against a basket of currencies to 92,201, moving away from the last three-week lows.
The 10-year US Treasury yield was 1.6979% for the third consecutive day of earnings, but still well below the level of 1.7760% reached on March 30, which was the highest in the last year.
“There is a widespread expectation that inflation will rise in the coming months, but there is also a broad consensus that this will be a transitional phenomenon,” Deutsche Bank strategist Jim Reid wrote in a note.
Overnight data showed that China’s exports rose in March, with imports rising to four-year highs, indicating an improvement in global demand.
Asian stock markets were generally positive after the data, but the momentum did not help much to support foreign exchange markets. Until early trading in London, China’s offshore yuan fell 0.1% against the dollar, changing hands to 6.5523.
The euro fell 0.1% to $ 1.1895. Germany’s ZEW survey on investor economic sentiment for April will end at 1000 GMT.
The Australian dollar, which is seen as a liquid proxy for risk appetite, fell 0.2% against the US dollar to 0.7609.
On Monday, Australia abandoned its goal of vaccinating almost the entire population by the end of 2021.
The New Zealand dollar also fell 0.1%. The New Zealand Reserve Bank is due to meet on Wednesday and expects rates to remain constant.
The pound rose 0.1% against the dollar to $ 1.3763. The British economy grew in February as companies prepared to lift the third coronavirus block, data showed gross domestic product.
Elsewhere, bitcoin rose 1.6 percent to $ 60,807.77, ahead of Coinbase Global Inc., the largest cryptocurrency exchange in the United States, listed on the Nasdaq on Wednesday.
Reported by Elizabeth Howcroft, edited by Larry King