By Gina Lee
Investing.com – The dollar was down on Tuesday morning in Asia but hovered near its highest level in nearly a month as investors expect U.S. Secretary of the Treasury nominee Janet Yellen to affirm a more traditional commitment to market-set currency rates when she testifies at Capitol Hill later in the day.
The that tracks the greenback against a basket of other currencies edged down 0.11% to 90.653 by 11:03 PM ET (4:03 AM GMT). The index was 0.1% lower at 90.690 earlier in the session after edging as high as 90.94 overnight for the first time since Dec. 21. Trading was subdued with U.S. markets closed for a holiday.
The pair was up 0.29% to 104. The dollar was little changed against the yen and consolidated in a narrow range after reaching a one-month high of 104.40 during the previous week. The Bank of Japan and the European Central Bank will hand down their policy decisions on Thursday.
The pair gained 0.42% to 0.7712 and the pair was up 0.39% to 0.7134.
The pair inched down 0.05% to 6.4868, while the pair edged up 0.16% to 1.3606.
Yellen will testify before the Senate Finance Committee as part of her Senate confirmation hearing, where she will likely touch on topics ranging from foreign-exchange policy to taxes.
U.S. President-Elect Joe Biden’s nominee to head the Treasury will reportedly affirm the U.S.’ commitment to market-determined exchange rates and indicate that the country doesn’t seek a weaker dollar for competitive advantage and is also expected to tell the committee that the government must “act big” with its next COVID-19 relief package.
The comments are indicative of a return to a more traditional posture, with outgoing President Donald Trump often decrying dollar strength. Biden and his administration will be sworn in on Wednesday.
The U.S. currency opened 2021 with a near 2% rally against major peers as U.S. Treasury yields climbed after Biden proposed a $1.9 trillion COVID-19 relief package during the previous week. Expectations of ultra-loose U.S. monetary policy and hopes for a post-COVID-19 economic recovery globally saw the dollar shed nearly 7% in 2020.
Losses have also been capped by the recent unwinding of bearish bets, with data showing that hedge funds piled up the biggest net short position since May 2011 in the week ended Jan. 12. The large positions indicate that traders are more likely to reduce their positions than add to their already big bets.
However, some investors still expect the currency to eventually resume its decline during 2021.
An improving economic outlook under increased fiscal spending and accelerated vaccinations, along with ultra-easy monetary policy, will hamper any attempt for a more sustained rally, Commonwealth Bank of Australia (OTC:) analyst Kim Mundy said in a note.
“Further USD upside this week will be contained,” the note added.
The euro rose 0.1% to $1.20855, climbing back up after falling to 1.2054 for the first time since Dec. 2 on Monday.
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