* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
By Saikat Chatterjee
LONDON, Jan 11 (Reuters) - The dollar gained broadly on
Monday as widening U.S. Treasury yields and expectations of more
fiscal stimulus lifted the greenback against its rivals, with
the euro falling to a two-week low.
President-elect Joe Biden, who takes office on Jan. 20 with
Democrats able to control both houses of Congress, has promised
"trillions" in extra pandemic-relief spending. Ordinarily, the extra spending plans would force investors
to worry about rising inflation and its detrimental impact on
the U.S. dollar in a weak economy but the currency has been
supported in recent weeks thanks to rising U.S. yields.
Measured in inflation-adjusted terms, U.S. 10-year real
Treasury yields are rising faster than their European
counterparts. As a result, the euro EUR=EBS fell to $1.2167,
its lowest since Dec. 25, after climbing to $1.2349 last week.
"It is hardly surprising that the recent acceleration in
real U.S. yields has reminded the FX markets to end its focus on
inflation and to assume a more comprehensive approach in its
dollar valuation," Commerzbank strategists said in a note.
"That means: things are not looking so bad for the dollar at
present that EUR-USD levels of 1.2350 and above would currently
be justified."
The nominal yield on benchmark 10-year U.S. debt
US10YT=RR is up more than 20 basis points to 1.1187% this
year, helping the dollar to rise to a one-month high of 104.20
against the Japanese yen JPY= .
The dollar index =USD has lost roughly 12% since a
three-year peak in March. However, it is now more than 1.3%
above the almost three-year low it hit last week. It rose 0.1%
to 90.418 on Monday.
"Everyone's asking whether this changes the weaker dollar
narrative - that's why I think we're getting a bit of a
continuation of what we're seeing on Thursday and Friday," said
National Australia Bank's head of FX strategy, Ray Attrill.
That has also prompted some investors to trim their bearish
bets versus the dollar with net short bets on the greenback
versus the euro declining to $21 billion compared to $24 billion
two weeks earlier, according to latest positioning data.
Elsewhere, the hitherto soaring Australian dollar AUD=D3
fell nearly 1% to $0.7693, unmoved by another solid month of
local retail sales. The dollar also rose 0.2% to 6.4864 yuan
CNY= after weak factory gate prices in China. CNY/
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
US real yields and euro https://tmsnrt.rs/2LbvJA7
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>