US Dollar is Being Supported by High US Revenues in Light of The Possibility of New Stimulus

The dollar held on to four-day gains against major counterpart currencies on Tuesday, as prospects for a massive fiscal stimulus pushed US yields higher.

US President-elect Joe Biden, who will take office on January 20, with his Democratic Party in control of both houses of Congress, promised “trillions” of additional spending to mitigate the repercussions of the Corona pandemic.

The dollar index recovered from its lowest level in nearly three years reached last week, as the yield on the benchmark US 10-year Treasury exceeded 1% for the first time since March and rose 1.148% overnight.

The support from higher yields has so far outweighed fears that additional spending will raise debt levels and spark faster-rate inflation, which usually reduces the attractiveness of the US currency.

Many analysts expect the US dollar to continue the decline that saw the dollar index drop nearly 7% in 2020, as the expansion of stimulus and the introduction of vaccines against the Coronavirus led to the shining of the global economic outlook. Investors tend to buy dollars when they are looking for safer investments.

The dollar index was little changed at 90.578 in Asian trading, after rising to 90.73 overnight for the first time since December 21. The index fell to 89.206 on January 6, a level not seen since March 2018.

The greenback added 0.1% to 104.305 yen, after rising to a one-month high of 104.40 on Monday.

The euro largely settled at $ 1.21425, after falling to $1.21230 in the previous session for the first time since December 21.

Currency markets have nearly ignored Democrats’ push to impeach President Donald Trump following the congressional siege last week.

The Chinese yuan opened in immediate trading in local markets at 6.4770 per dollar and was trading at 6.4712 per dollar at midday, up from the close at the end of the previous session.

Bitcoin was trading at $35,186,000 as it cooled its strong rally since it rose to an all-time high of 42,000 on January 8th.