Dollar pauses after strong gains on hawkish Fed plays; bitcoin reaches $30,000
By Kevin Buckland
TOKYO (Reuters) – The U.S. dollar paused for breath on Tuesday after its best rally this month against major peers, as a robust U.S. labor market bolstered the case for a rate hike by the Federal Reserve next month.
The yen, highly sensitive to long-term US bond yields, managed to claw back some of Monday’s more than 1% slide as the 10-year Treasury yield also eased in Tokyo trade after a sharp two-day gain. The Japanese currency came under further pressure overnight as the new Bank of Japan governor, Kazuo Ueda, vowed to stick with the ultra-easy stimulus for now.
Leading cryptocurrency bitcoin briefly touched $30,000 for the first time since June.
The US dollar index – which measures the dollar against six major counterparts, including the yen – fell 0.06% in early Asian trade, after gaining 0.39% earlier in the week.
The dollar fell 0.16% to 133.39 yen, after jumping 1.1% overnight.
Traders now see the Fed as 74% likely to raise interest rates by another quarter of a point on May 3, after data released on Good Friday showed US employers continued to hire at a brisk pace in March, pushing down the unemployment rate. Last week money markets priced an increase next month as a coin toss.
The consumer price index (CPI), due on Wednesday, will be the next big clue to the Fed’s policy direction.
Ten-year Treasury yields hit 3.436% overnight before settling around 3.41% in Tokyo. They had fallen to a seven-month low of 3.253% on Thursday. The dollar index fell to a two-month low of 101.40 on Wednesday.
“Financial markets have been overly pessimistic about the US economy since several small US banks collapsed in March,” Commonwealth Bank of Australia strategists Joseph Capurso and Kristina Clifton wrote in a client note, referring to SVB and Signature Bank’s demise.
“Strong underlying CPI is likely to be the catalyst for a change in market prices for May, delaying pricing for the start of rate cuts,” they said, postulating that the dollar index could lift toward its 100-day moving average of 103.91 this week. .
The euro rose 0.14% to $1.08745 after Monday’s 0.34% retreat. Sterling ticked up 0.11% to $1.2397 after falling 0.23% overnight.
The Aussie rose 0.12% to $0.6650, clawing back part of a 0.48% slide in the previous session.
Bitcoin hit a new 10-month high of $30,000 in early Tuesday trading before last fetching $29,787, after shedding recent ranges on Monday.
The digital token had been stuck between around $26,500 and $29,400 for the previous three weeks.
“Many traders appear to be convinced that the dollar’s days are numbered as it will slowly lose some of its preferred reserve currency status, and that crypto will be one of the beneficiaries,” Edward Moya, an analyst at OANDA in New York, wrote in a Note.
“Bitcoin’s ceiling remains the $30,000 level, and how it behaves when trading north of that will determine whether the next big bull phase is upon us.”
(Reporting by Kevin Buckland; Editing by Shri Navaratnam)
