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Dollar rebounds as U.S. yields rise

Biden will introduce a USD1.8 trillion package that would necessitate tax increases of 1.3 percent of GDP. This will be the highest value since 1968.

The dollar has recovered from a one-month low reached earlier this week. Investors expect the Federal Reserve to keep its policy settings unchanged, with Fed Chairman Jerome Powell wished to reiterate his dovish message.

The dollar index

The dollar index rose 0.2 percent to 91.047, bouncing back from a low of 90.679 on Monday, its lowest level since March 3, though investors remained skeptical that a recent downtrend had ended. Higher U.S. Treasury yields aided the greenback’s gains, with benchmark 10-year yields increasing above 1.60 percent after mediocre auction performance.

On Tuesday, investors’ inflation expectations, as determined by the break-even inflation rate calculated from U.S. inflation-linked bonds, surpassed 2.40 percent for the first time since 2013. Analysts believe the Fed would remain unconcerned about the possibility of further stimulus plans. Inflation expectations are also increasing, implying that the dollar will continue to lose ground in the coming weeks.

The euro fell 0.2 percent to $1.2070, down from a two-month high of $1.2117 on Monday.

Conclusion

The dollar rose 0.59 percent overnight to 108.97 yen, extending its rebound from a seven-week low of 107.48 hits last week, in line with rising U.S. bond yields. After the country’s consumer price index came in lower than predicted, the Australian dollar fell 0.3 percent to $0.77415.

Biden expects to unveil a proposal to raise taxes on the wealthiest 1% of the population, including the largest-ever rise in investment gains taxes, to finance $1 trillion in childcare and other social spending. In the United States, 29.1% of the population wholly vaccinated, while 42.7 percent have received at least one dose. Two-thirds of the population aged 65 and up has been vaccinated, with 81.8 percent having received at least one amount.

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