Greenback wallows at two-week low; bitcoin steadies after surge previous $48,000

Tokyo, February 10

The dollar hit two-week lows on Wednesday as demand for safer assets ebbed on Wednesday, with traders looking ahead to an expected recovery from the COVID-19 pandemic this year, driven by massive fiscal and monetary stimulus.

Bitcoin consolidated around $46,500 after reaching a new high at $48,216 overnight following Tesla’s disclosure of a $1.5 billion investment in the leading cryptocurrency.

Rival virtual currency ethereum, which often moves in tandem with bitcoin, reached a record $1,826 on Wednesday before trading 1.1% higher at $1,791.

“The economic outlook for the year, according to market consensus, appears to be buoyant,” said Michael McCarthy, chief strategist at CMC Markets in Sydney, pointing to the weaker dollar.

“Sentiment and positioning are key drivers of the market right now.”

Traditionally viewed as a safe-haven, the dollar has sunk against major peers as optimism over monetary and fiscal support, robust corporate earnings and coronavirus vaccines bolstered risk sentiment.

The dollar index drifted to as low as 90.378 on Wednesday for the first time this month and was last at 90.398, set for a third day of losses.

There has been a tug-of-war among traders over the impact on the dollar of President Joe Biden’s planned $1.9 trillion fiscal stimulus package.

On one hand, it is expected to speed a U.S. recovery relative to other countries, bolstering the currency. But on the other, it is a major driver in a global reflation narrative that should lift riskier assets at the dollar’s expense.

After a strong start to the year for the greenback, the latter view appears to be regaining sway with last week’s U.S.

jobs data providing the turning point, according to Westpac analysts.

“Friday’s disappointing payrolls completely flattened the USD, that data point casting doubt on the budding U.S.

outperformance narrative and refocusing minds on the prospect for sustained reflationary U.S. fiscal and monetary policy,” they wrote in a client note on Wednesday.

“Nursing eye-catching losses, a test of 90 on the cards in coming days,” the note said, referring to the dollar index.

The dollar was almost flat at 104.58 yen, after dipping as low as 104.5 for the first time this month in the previous session.

The euro edged up to $1.2126, adding to a three-day gain.

The British pound renewed an almost three-year high at $1.3827 before trading 0.1% higher at $1.3818. Reuters

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