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Rising yields have spooked markets in recent weeks, with
participants worried that an economic recovery from the impact
of COVID-19, combined with fiscal stimulus, could cause a jump
in inflation from pent-up consumer demand when lockdowns end.
Riskier currencies including the Australian and New Zealand
dollars recovered some recent losses on Monday, as yields fell
back and stock markets rallied. But they resumed their decline
on Tuesday.
The dollar rose to its highest in a month versus a basket of
currencies, up 0.3% on the day at 91.326 at 0808 GMT, in its
fourth straight session of gains.
The Swiss franc was at its lowest since November 2020 against
the dollar. Dollar-Swiss has been rising since early January and
gained some 3.8% so far in 2021.
"With low-yielders mostly bearing the brunt of any equity rally
for now, even if risk assets move back into positive area today
later today, USD may still prove its resilience," wrote ING
strategists in a note to clients.
China's banking and insurance regulator expressed wariness of
the risk of bubbles bursting in foreign markets, and said
Beijing is studying measures to manage capital inflows to
prevent turbulence in the domestic market.
The New Zealand dollar was down around 0.6%, at 0.7222 versus
the U.S. dollar.
The Australian dollar was down 0.3% at 0.7747 versus the U.S.
dollar, after the Reserve Bank of Australia re-committed to
keeping interest rates at historic lows.
"We continue to believe, though, that the strengthening global
recovery boosted by continued loose monetary and fiscal policies
will remain supportive for higher commodity prices and a
stronger Australian dollar in the year ahead," wrote MUFG
currency analyst, Lee Hardman.
The euro fell, after top European Central Bank officials sounded
alarm over the rises in bond yields.
Policymaker Francois Villeroy de Galhau said on Tuesday that
some of the recent rises were unwarranted and that the ECB must
push back using the flexibility embedded in its bond purchase
programme.
ECB Vice President Luis de Guindos said the ECB had the
flexibility to counter any undesired rise in yields.
Market participants said that the ECB and the U.S. Federal
Reserve were taking divergent tones on rising bond yields, with
the Fed appearing less concerned.
At 0842 GMT, the euro was down 0.3% at $1.20125, having hit its
lowest in nearly a month.
A flash estimate of euro zone inflation for February is due at
1000 GMT.
Elsewhere, bitcoin was a touch lower, down 1% at around $49,000
at 0834 GMT, having recovered some recent losses in the previous
session.
(Reporting by Elizabeth Howcroft; editing by John Stonestreet)
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