The U.S. dollar gained ground after last week’s decline

The U.S. dollar gained ground on April 12 after last week’s decline as traders assessed the outlook for Treasury yields. Furthermore, it has to be mentioned that traders are awaiting crucial U.S. inflation and retail sales data in the following days.

Besides, the euro dipped back below $1.19 while the British sterling briefly dropped to a two-month low, with some analysts citing blood clot concerns around AstraZeneca’s coronavirus vaccine.

The greenback’s fortunes have been tied to the performance of Treasury yields for most of 2021. Remarkably, concerns about increasing inflation in the United States and a stimulus-fuelled economic recovery triggered a significant increase in yields on U.S. government bonds in February.

A drop in U.S. yields last week triggered the worst week for the greenback in 2021. However, the currency found some stability on Monday.

Federal Reserve Chairman Jerome Powell announced that the U.S. economy is at “an inflection point” and looked set for a strong recovery in the following months. However, he also warned of risks stemming from a hasty reopening.

Furthermore, investors are now waiting for U.S. March inflation data due on April 13.

MUFG analysts announced that the dollar’s fortunes could well remain linked to 10-year yields.

The dollar has some upside potential this week

The benchmark 10-year Treasury yield stood at 1.6462% after falling to as low as 1.6170% last week. It had boosted to a more than a one-year high of 1.7760% on March 30.

The U.S. dollar index, which measures the greenback against a basket of currencies, boosted by 0.1% and settled at 92.275. At the same time, the euro sank 0.2% to $1.1875.

The world’s largest cryptocurrency, Bitcoin, traded over $60,000, closing the gap to its record high.

Against the pound, the dollar initially increased before reversing course. The British sterling was last up 0.2% at $1.3734 after briefly hitting a two-month low of $1.3669. The American currency dropped by 0.2% to 109.41 yen against the Japanese yen.

According to Commonwealth Bank of Australia strategist Kimberley Mundy, the dollar has some upside potential this week.

She added that robust U.S. economic data will highlight the divergence between the U.S.’s fast economic rebound and the more stunted recoveries in other developed economies.

Mundy said that the greenback can lift back toward 110 yen, while the euro has scope to retrace most of the recent gains from its almost five-month low, close to $1.17.