Dollar Just Lower; Treasury Yields And Powell In Focus

Investing.com - The dollar edged marginally lower Thursday, pausing its recent rebound from near three-year lows on the back of higher U.S. yields as traders expect further substantial stimulus measures.

At 3:55 AM ET (0755 GMT), the U.S. Dollar Index, which tracks the greenback against a basket of six other currencies, was down just 0.04% at 90.302, holding just above the 89.206 low seen for the first time since March 2018 last week.

USD/JPY was up 0.1% at 104.00, EUR/USD fell 0.1% to 1.2155, GBP/USD climbed 0.2% to 1.3666, while the risk-sensitive AUD/USD was up 0.3% at 0.7756.

CNN reported overnight that President-elect Joe Biden will look to outline plans later Thursday of a fiscal stimulus package of around $2 trillion.

The dollar has risen in four of the past five trading sessions as the prospect of more stimulus, largely financed by borrowing, has weighed on U.S. government bonds, sending the benchmark Treasury yield above 1% for the first time since March.

Another factor which has supported the dollar of late has been recent concerns that the Federal Reserve may taper its monetary support sooner than had been originally expected as the economy recovers. 

Chairman Jerome Powell is scheduled to speak around 12:30 PM ET (1630 GMT), and this speech will be parsed for clues as to when its bond-buying program may be eased back.

However, many analysts expect the currency's bounce to be temporary, and longer term they expect more U.S. stimulus to support risk sentiment, weighing on the greenback, which is traditionally considered a safe-haven.

“As long as the Fed sticks to its Average Inflation Targeting framework, allows for the CPI overshot and keeps rates on hold (our base case for this year and next), the deeply negative real rate will weigh on USD,” said ING analysts, in a research note.

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