Dollar firms after nearing seven-week lows

FILE PHOTO: U.S. dollar banknote is seen in this picture illustration
FILE PHOTO: U.S. dollar banknote is seen in this picture illustration taken May 3, 2018. REUTERS/Dado Ruvic/Illustration

April 20, 2021

(Updates prices)

By David Henry

NEW YORK (Reuters) – The dollar firmed on Tuesday amid a mix of gains and losses against major currencies as interest rates in the United States moved in a tight range and the outlook for vaccinations in Europe improved.

After touching its lowest level in nearly seven weeks in Asia trading, the dollar index rose 0.2% at 91.186 in mid-day trading in New York.

The euro was flat at $1.2036 after rising nearly 0.4% and the British pound backed off 0.4% to $1.3943 after gaining 1% on Monday and touching $1.40.

The dollar has fallen in April as U.S. bond yields retreated from the 14-month highs of 1.776% reached last month. The currency and yield declines have come as evidence mounted that the Federal Reserve would be slower about tightening monetary policy than it had appeared to the market, analysts said.

The 10-year Treasury yield dropped to 1.56% at midday after trading in a narrow range around 1.60%.

The currency and interest rate markets could be relatively calm for another few weeks as the Fed and the European Central Bank each take their time about adjusting their rate policies, said Mazen Issa, senior currency strategist at TD Securities.

“There really isn’t a strong catalyst in either direction this month to really break us out of ranges,” Issa said.

Some encouragement for the euro came from the announcement that the European Union has secured an additional 100 million doses of the COVID-19 vaccine produced by BioNTech and Pfizer.

The vaccination news suggests that the pace of Europe’s recovery from the pandemic will begin to catch up with the United States and its story of faster growth, Issa said.

“The FX market is moving away from this idea of full-on U.S. exceptionalism to being in a little bit more in limbo now,” he said.

Against the Japanese yen, the dollar edged up to 108.10 after having broken below 108 for the first time since March 5.

The commodity-linked Norwegian crown hit its strongest since 2018 versus the dollar and also reached its strongest since January 2020 versus the euro.

Bitcoin rose 0.2% to $55,790.

(Reporting by David Henry in New York and Elizabeth Howcroft in London; Additional reporting by Hideyuki Sano and Kevin Buckland; Editing by Larry King, Steve Orlofsky, Alex Richardson and Dan Grebler)