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Dollar Pinned near One-Month Low, Bitcoin Steadies near $57k

LONDON, April 19 (Reuters) - The dollar traded just above a one-month low against major peers on Monday, with Treasury yields near their lowest in five weeks, after the U.S. Federal Reserve reiterated its view that any spike in inflation was likely to be temporary.

The dollar was also held down by improved risk sentiment amid a rally in global stocks to record highs.

Bitcoin stabilized after losses from Sunday, when it plunged as much as 14% to $51,541, which a report attributed to news of a power outage in China.

The dollar index, which tracks it against six other currencies, was at 91.552, not far from last week’s low of 91.484, a level not seen since March 18.

The dollar bought 108.40 yen, its lowest against the Japanese currency since March 24.

“Following the decline since end-March, the dollar index has stabilized since mid-last week,” said Jussi Hiljanen, chief strategist, USD and EUR rates at SEB.

“The dollar is likely to remain counter cyclical until the dollar rates in the 2-5y sector take another leg higher. As we expect the dollar rates to move more or less sideways during Q2, EUR/USD has room to gain in the coming months, especially if vaccination speeds up in the euro area and the earnings season pushes the stock market even higher.”

The euro changed hands at $1.1985, flat on the day and near its highest against the dollar since March 4. The European Central Bank meets on Thursday with internal divisions over the pace of bond buying, extended COVID-19 lockdowns and potential delays to the EU recovery fund form the backdrop.

The 10-year Treasury yield sank as low as 1.5280% last week from 1.7760% at the end of last month, its highest in more than a year.

The S&P 500 closed at a record high on Friday, extending a rally in global stocks.

Fed Governor Christopher Waller said on CNBC on Friday that the U.S. economy “is ready to rip” as vaccinations continue and activity picks up, but a rise in inflation is likely to be transitory, echoing comments from other Fed officials, including Chair Jerome Powell, over the past week.

“With liquidity still abundant, we are going to hear more about the FX carry trade – which thrives in a low volatility environment,” said Chris Turner, global head of markets and regional head of research for UK and CEE at ING.

“This especially being the case if the Fed manages to make the April 28th meeting a non-event. With the SOFR overnight USD interest rate now at 0.01%, the dollar clearly doesn’t score highly on the carry front. And indeed a little more confidence in the European and global recovery stories may well see flows start to resume to EM – having been derailed by the Treasury sell-off in February and March.”

MSCI’s emerging market currency index traded 0.1% higher on the day, and is up 0.8% from the start of last week.

Bitcoin stabilized around $57,471 after a weekend plunge.

Data website CoinMarketCap cited a blackout in China’s Xinjiang region, which reportedly powers a lot of bitcoin mining, for the selloff.

Analysts at National Australia Bank cited “speculation in several online reports” that the U.S. Treasury may crack down on money laundering within digital currencies for the sharp move lower.

The bitcoin rout also followed a decision on Friday by Turkey’s central bank to ban the use of cryptocurrencies for purchases.

Despite recent weakness, the world’s most popular cryptocurrency remains up 97% in 2021, after more than quadrupling last year.

“We suspect the 15% weekend correction in Bitcoin will not have broader market ramifications,” ING’s Turner said.

Reporting by Ritvik Carvalho; additional reporting by Kevin Buckland in Tokyo; editing by Larry King

Source: Reuters

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