From Peter Nurse
Investing.com – The dollar was broadly unchanged early in Europe’s trading day, trading near a monthly low, with government bond yields near their lowest level in five weeks.
At 2:55 a.m. ET (0755 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was 91.523, slightly lower than last week's low of 91.484, a level not seen since March 18 was achieved.
fell 0.2% to 108.53, fell 0.1% to 1.1968, near the highest level since March 4, rose 0.2% to 1.3857, while the risk-sensitive by 0.1 % rose to 0.7741.
The latest reading was 1.55%, a sharp drop from the high of just under 1.78% late last month, reducing the attractiveness of US dollar-denominated assets as an investment.
"One of the biggest perceived risks to the 2021 recovery story in financial markets is that of a bond tantrum – or a disorderly spike in US yields," ING analysts said in a note. "So it was surprising … to see the sharp decline in US yields despite the above-consensus US CPI and retail sales."
The Federal Reserve has persistently communicated with the market that it will see through a spike in inflation, if viewed as temporary, and maintain the central bank's ultra-light monetary policy for some time.
Fed Governor Christopher Waller continued the issue on Friday, saying the US economy was "ready to tear apart" while vaccinations continue and activity picks up, but a spike in inflation is likely to be temporary.
"We're tempted to say that DXY (the dollar index) hit a major corrective high at 93.44 at the end of March – and is now heading for a retest of the yearly lows at 89.21," added ING.
The European Central Bank will meet practically later this week and little new is expected as policy makers want to avoid shaking the market as it is likely to be a difficult task to deprive financial markets of emergency stimulus.
“April has been a good month for EUR / USD so far – although Europe is still struggling with third waves of Covid. It appears that investors are very forward-thinking and are taking advantage of the recent inflection in European vaccination rates to gain confidence that Europe will recover during the quarter, ”ING said.
Elsewhere, the figure rose 0.5% to 76,192, with the US having "consequences" if the imprisoned opposition leader Alexey Navalny died, exacerbating the conflict over the dissident, who has already survived an alleged assassination attempt.
The US on Thursday ordered a series of new sanctions against Russia, including restrictions on buying new national debt, in response to allegations that Moscow was behind a hack on SolarWinds and disrupted last year's US elections.
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