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The
dollar index drifted to a two-week low of 90.299 for the first
time this month and set for a third day of losses. It last
traded 0.05% lower at 90.386.
Bitcoin consolidated around $46,500 after reaching a new high of
$48,216 overnight following Tesla's disclosure of a $1.5 billion
investment in the leading cryptocurrency.
Rival virtual currency ethereum, which often moves in tandem
with bitcoin, reached a record $1,826 on Wednesday before
pulling back slightly. It was trading 1.1% higher at $1,791.
Sweden's crown strengthened to a one-month high of 10.0406
crowns per euro ahead of the central bank's interest rate
decision, then pared some of those gains after the bank kept
monetary policy unchanged as expected.
Traditionally viewed as a safe-haven, the dollar has sunk
against major peers as optimism over monetary and fiscal
support, robust corporate earnings and coronavirus vaccines
bolstered risk sentiment.
U.S. consumer price inflation numbers for January are due at
1330 GMT, and along with a speech by Federal Reserve Chair
Jerome Powell will be key events for the future direction of the
dollar.
"The mix of clear upside price pressures, the risk of an
overshoot and CPI staying higher for longer, along with a
cautious Fed sticking to its Average Inflation Targeting
framework to make up for past inflation undershoots, should lead
to a lower USD as U.S. real rates remain deeply negative," ING
strategists wrote in a note to clients.
There has been a tug-of-war among traders over the impact on the
dollar of U.S. President Joe Biden's planned $1.9 trillion
fiscal stimulus package.
On the one hand, it is expected to speed up a U.S. recovery
relative to other countries, bolstering the currency. But on the
other, it is a major driver in a global reflation narrative that
should lift riskier assets at the dollar's expense.
After a strong start to the year for the greenback, the latter
view appears to be regaining sway, with last week's U.S. jobs
data providing the turning point, according to Westpac analysts.
Kristoffer Kjær Lomholt, chief analyst for forex and rates
strategy at Danske Bank, said: "The key question remains if the
US will be at full employment in 6 months and pricing of US real
rates on the back of that."
"We continue to see downside risk for EUR/USD (targeting 1.16 on
12M) and though s/t risks are probably more balanced after the
correction, we do see a situation where an open dollar position
could amplify investor returns this year."
The dollar gained 0.2% to 104.70 yen. The Japanese currency
earlier hit its highest against the greenback since Jan. 29.
The euro edged up to $1.2129, adding to a three-day gain and
hitting its highest since the start of February.
The British pound set fresh three-year highs of $1.3855.
(Reporting by Ritvik Carvalho; additional reporting by Kevin
Buckland in Tokyo; Editing by Kim Coghill and Hugh Lawson)
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