The US dollar strengthened against major currencies, climbing to a one-year high against the yen on Tuesday. The gains were due to accelerating US vaccinations and plans for a major stimulus package that stoked inflation expectations and raised Treasury yields.
The dollar found support as investors also digested the fallout from the collapse of highly leveraged investment fund Archegos Capital.
The dollar is now on track for the best month since late 2016, with the end of Japan’s fiscal year this month driving up its demand.
The weakening of the Yen was also related to higher inflation expectations in the US than in Japan and a rise in long-term US yields.
10-Year Treasury yields rose to 14-months’ highs on Tuesday ahead of President Joe Biden’s unveiling of a $3 trillion to $4 trillion infrastructure plan.
Analysts point out that the market faces the danger of pricing in too much inflation risk, which could weaken the dollar in the months ahead.
The US dollar is currently gaining as stocks lose. EURUSD is down 0.34%, SPY is down 0.46%, QQQ is down 0.82%
