The dollar struggled at a one-week low on Tuesday as traders grew wary about the prospects for the greenback against the backdrop of a large U.S. fiscal stimulus package.
Investors have pushed up the dollar in recent weeks as Democrats moved to fast-track President Joe Biden’s $1.9 trillion COVID-19 relief package, but some analysts say massive fiscal spending coupled with continued ultra-easy Federal Reserve monetary policy will be a dollar headwind.
“The view on the effects the package will have on the U.S. economy differ,” Commerzbank strategists said.
“Whereas until recently the prospect of fiscal support caused positive reactions on the markets, the market no longer seems to be entirely certain about that any longer.”
Having attempted to bounce in the previous session, the dollar weakened broadly against its peers as U.S. Treasury yields softened from overnight highs.
The biggest beneficiary of the weakening dollar was cryptocurrencies with bitcoin rocketing above $48,000, building on a nearly 20% surge overnight after Tesla Inc announced a $1.5 billion investment in the digital asset.
The dollar index was 0.3% lower at 90.73 in early London trading, having dipped to 90.603 for the first time since Feb. 1.
Disappointing U.S. jobs data on Friday knocked the wind out of a two-week run that had lifted the dollar to a more than two-month high of 91.6.
The euro rose 0.2% to $1.20775 on Tuesday, up from a two-month low of $1.9520 touched Friday.
The British pound revisited its highs since May 2018, climbing to $1.3784 in Asia. It last traded up 0.3% at $1.3774.
Reporting by Saikat Chatterjee; Editing by Kirsten Donovan