The U.S. dollar weakened on Monday, influenced by declining Treasury yields, as traders awaited crucial economic data for insights into potential Federal Reserve interest rate adjustments.
Bitcoin surged to a more than two-year high due to significant inflows into cryptocurrency exchange-traded funds. Meanwhile, the euro remained steady after Friday’s 0.33% gain, with attention turning to the European Central Bank’s policy decision scheduled for Thursday.
The Japanese yen hovered near the important 150 per dollar mark as investors speculated about the potential timing of the Bank of Japan’s exit from its negative interest rate policy, possibly as early as this month.
The dollar index, which gauges the currency against six major counterparts, including the euro and yen, dipped 0.07% to 103.79 in early Asian trading, nearing the lower end of the 103.43-104.97 range observed over the past month. The index had declined by 0.26% on Friday following weak manufacturing and construction spending data.
The decline in Treasury yields further dampened support for the dollar, with the benchmark 10-year yield dropping to 4.178%, its lowest level in two weeks. On Monday, the yield hovered around 4.19%.
Westpac strategists noted in a client note that the bias seems to be shifting towards testing range support in anticipation of key macroeconomic releases this week, as well as Federal Reserve Chair Jerome Powell’s annual testimony to Congress.
“However, markets will need a major shift in data to suggest that range support will be anything other than another buying opportunity,” the note said, indicating that the dollar index is likely to remain within its current range.
This week will feature manufacturing and services ISM readings on Tuesday, with the main highlight being the monthly payrolls figures scheduled for release on Friday.
Meanwhile, the dollar slipped 0.09% to 149.99 yen as traders considered cautious comments from BOJ Governor Kazuo Ueda from late last week, suggesting it was premature to conclude that the central bank’s inflation target is close to being achieved.
This contrasted with the hawkish remarks from BOJ board member Hajime Takata earlier on the same day, which had pushed the yen to a more than two-week high of 149.21 per dollar.
Market participants are evaluating whether the BOJ will abandon its negative interest policy at its March 18-19 meeting or opt to delay until April or beyond.
Elsewhere, the euro remained relatively unchanged at $1.08425, hovering near the upper end of its recent trading range.
Most economists anticipate that the ECB will implement rate cuts at its June meeting, but they will be looking for further insights on the timing from ECB President Christine Lagarde’s press conference.
Bitcoin traded approximately 1.5% higher from Sunday at $63,500, having earlier reached $64,284.75, its highest level since November 2021, the same month it achieved its record high of $68,999.99.