American Dollar extends rebound as political strain worsens

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American Dollar extends rebound as political strain worsens

On Monday, the US Dollar Index (DXY) measured against a basket of six major currencies had wrapped up the day sharply higher, pulling back from a nearly three-year low bottomed last week, as the greenback’s safe-haven bid had ramped up with less than two weeks remaining of President Trump’s term.

In point of fact, US Dollar fell to a nearly three-year low last week following a Democratic sweep in twin Georgia Senate run-offs which in effect had secured a majority for the Democrats in both houses of US Congress, stoking hopes of a larger stimulus pay-check alongside a rise in inflation indicators and a debasement of a sharply depreciating American Dollar.

Nonetheless, the American currency’s narratives had altered histrionically this week, as a number of FX traders across the globe remained utterly cautious ahead of a January 20 inauguration of the President-elect Joe Biden since a raft of local outlets had flagged possibilities of further attack in the US Congress.

Apart from that, at 99 basis points, spread between the 10-yr and 2-yr Treasury yields had spiked to their steepest level in more than three years and a half on Monday, which in effect had upsized appetites for the greenback further.

US Dollar gains across the board as yields rise

Citing statistics, in the day’s FX market round off, the US Dollar Index (DXY) edged 0.2 per cent higher to 90.49, marking up its fourth straight session of gains since hitting a March 2018 low of 89.21 last week.

Apart from that, a stronger US Dollar had chopped about 0.3 per cent off British Pound to $1.3513, while the bloc’s common currency Euro shed 0.57 per cent to $1.2141 and the safe-haven Japanese yen faltered 0.33 per cent to 104.24 yen against its American counterpart.

Meanwhile, citing a risk-off period in the Capitol Hill with Democrats seeking an immediate impeachment of President Trump over last week’s riot in the US Capitol, a director of currency strategist and portfolio manager for Amundi Pioneer Asset Management in Boston, Paresh Upadhyaya said, “The appreciation of the dollar is coming at a time of not only rising yields but a risk-off period created by heightened uncertainty about political developments in the U.S. I think that is exaggerating the strength in the dollar”.