Dollar strengthens as investors turn cautious, market waits for Powell testimony

NEW YORK (Reuters) – The dollar rose against a basket of most major currencies on Tuesday, while yields on U.S. Treasuries dipped, as fears about the lasting impact of the coronavirus crisis resurfaced.

The dollar index was last up 0.38% at 92.1330, reversing course from Monday when it dipped but hovered below four-month highs.

Yields on U.S. Treasuries also slipped again, at 1.654%.

“We’re finally coming to the realization that the pandemic has not been fought in a global united way and it’s starting to bite us,” said Juan Perez, a currency trader and strategist at Tempus Inc. “This (U.S.) administration has shown it’s committed to inoculations. That whole safe haven role the dollar plays for everyone, is holding.”

The dollar index has gained around 2.4% so far in 2021, as investors see the relatively quick rollout of COVID-19 vaccines and stimulus spending in the United States as boosting economic growth.

Investors will be listening to Congressional testimony by U.S. Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen later in the day for hints about their tolerance for rising yields, which could determine the future direction for the dollar.

A two-year Treasury auction later on Tuesday will also be closely watched.

But there was a wary tone in global markets, with most equities in the red.

Contributing to market caution was a third wave of the COVID-19 pandemic in Europe. Germany is extending its lockdown and urging citizens to stay at home for five days over the Easter holidays, Chancellor Angela Merkel said.

Euro-dollar was down 0.44% at $1.1879.

The New Zealand dollar fell on new measures to cool the housing market, dropping to a three-month low against the U.S. dollar.

It was down about 1.8% on the day at 0.703.

The drop was triggered by the New Zealand government introducing measures to curb speculation on its red-hot housing market, where house prices have risen 23% in 12 months. The Australian dollar – considered a liquid proxy for risk – also took a hit and was down 0.81% at 0.768 versus the U.S. dollar.

Turkey’s lira stabilized somewhat, having plunged 7.5% on Monday after President Tayyip Erdogan sacked the hawkish central bank chief. It was up around 1.22% against the U.S. dollar, with the pair changing hands at 7.898, compared with Monday’s low of 8.485.

Graphic: Turkey Lira –

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