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Dollar rallies as risk appetite dims, after Yellen's comments on rates

05/04/2021 | 03:45pm EDT
FILE PHOTO: U.S. One dollar banknotes are seen in front of displayed stock graph in this illustration taken

    * Treasury's Yellen says U.S. interest rates may need to rise 
    * Commodity currencies slump against the dollar
    * Ethereum, dogecoin hit record highs
    * Graphic: World FX rates https://tmsnrt.rs/2RBWI5E

 
    By Gertrude Chavez-Dreyfuss
    NEW YORK, May 4 (Reuters) - The dollar hit a two-week high on Tuesday, as risk appetite faded amid a
sell-off in stocks, with U.S. Treasury Secretary Janet Yellen's comments saying interest rates may need to
rise to prevent the American economy from overheating also supporting the greenback.
    Yellen, in prepared remarks on Tuesday, made the comment as more of U.S. President Joe Biden's economic
investment programs come on line. She did say that the additional spending was small compared to the
relative size of the economy.
    The dollar's safe-haven appeal received a further boost as the Nasdaq fell more than 2%, the S&P
more than 1% and the Dow Jones Industrial Average a less steep 0.3%, and as Treasury yields
declined.
    Analysts said much of the good news on the economy has likely been priced in by the market.
    "After improving dramatically through the first quarter, U.S. economic expectations have converged with
reality, meaning that surprises are no longer skewed toward the positive," said Karl Schamotta, chief market
strategist at Cambridge Global Payments in Toronto. 
    "For many investors and momentum traders, some rebalancing, away from risk-sensitive currencies and
toward havens, is making a lot of sense at this juncture," he added. 
    Tuesday's bounce reversed losses sustained on Monday after a disappointing U.S. manufacturing survey
report, leaving the dollar 1% above a one-month low struck last week. 
    The dollar index, which measures the dollar's value against a basket of other major currencies,
climbed 0.3% to 91.278. It fell more than 2% in April.
    "There is no consensus right now on what will happen to the dollar for the rest of the year, as there
was at the start," Tempus Inc said in its latest research note.
    "While some traders see the U.S. dollar with room to grow because of bond yields going higher in the
future as inflation expectations grow, others believe the buck is now overvalued and will only keep
dwindling as the rest of the world successfully plays catch-up."
    The U.S. dollar gained 0.8% against the Australian dollar to US$0.7704 and 0.9% versus the New
Zealand dollar to US$0.7138, even though commodity prices were generally firmer across the board.  
 
    The euro fell 0.4% against the dollar to $1.2013. Against the yen, the dollar rose 0.2% to
109.32 yen.
    Sterling dipped 0.1% to $1.3881 ahead of a Bank of England meeting on Thursday, which may
announce a slowdown in its bond buying program as the vaccine rollout bolsters Britain's economy.
    In the cryptocurrency sector, ethereum powered to another record peak of $3,530 on Tuesday,
amid increasing institutional interest. It was last down 1.7% at $3,370.
    Dogecoin, created as a joke for early crypto adopters, hit an all-time high of US$0.5922. It was last up
36% at US$0.5549, according to CoinGecko.com.
    
    ========================================================
    Currency bid prices at 3:35PM (1935 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change                   
                                              Session                                             
 Dollar index                 91.2820        90.9910     +0.33%         1.446%        +91.4030    +90.9850
 Euro/Dollar                  $1.2013        $1.2063     -0.42%         -1.68%        +$1.2063    +$1.1999
 Dollar/Yen                   109.3200       109.0750    +0.23%         +5.81%        +109.4800   +109.0450
 Euro/Yen                     131.32         131.57      -0.19%         +3.47%        +131.6300   +131.1600
 Dollar/Swiss                 0.9137         0.9113      +0.26%         +3.28%        +0.9160     +0.9115
 Sterling/Dollar              $1.3887        $1.3909     -0.18%         +1.62%        +$1.3908    +$1.3840
 Dollar/Canadian              1.2306         1.2278      +0.23%         -3.36%        +1.2352     +1.2276
 Aussie/Dollar                $0.7707        $0.7764     -0.75%         +0.18%        +$0.7763    +$0.7675
 Euro/Swiss                   1.0976         1.0990      -0.13%         +1.56%        +1.1010     +1.0968
 Euro/Sterling                0.8650         0.8673      -0.27%         -3.21%        +0.8689     +0.8646
 NZ                           $0.7139        $0.7200     -0.88%         -0.61%        +$0.7202    +$0.7116
 Dollar/Dollar                                                                                    
 Dollar/Norway                8.3345         8.2830      +0.69%         -2.87%        +8.3610     +8.3040
 Euro/Norway                  10.0130        9.9889      +0.24%         -4.33%        +10.0450    +9.9772
 Dollar/Sweden                8.4843         8.4083      +0.43%         +3.51%        +8.4978     +8.4134
 Euro/Sweden                  10.1926        10.1493     +0.43%         +1.15%        +10.1991    +10.1498
 
    
 (Reporting by Gertrude Chavez-Dreyfuss: Editing by Jonathan Oatis and Alistair Bell)
  

© Reuters 2021
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