Recovery bets drive dollar to fresh lows

TOKYO/SINGAPORE: The US dollar was sold to multi-year lows against sterling and the Australian and New Zealand currencies on Monday, as investors cheered vaccine progress and wagered on the pandemic recovery bringing a global trade boom and an export windfall.

The British pound hit $1.4043, its highest since April 2018, as Prime Minister Boris Johnson charts a path out of lockdowns on the back of rapid vaccinations.

The Aussie rose as much as 0.5% to an almost three-year high of $0.7908 and the kiwi hit $0.7338, also its best since early 2018, helped by S&P's upgrade of New Zealand's sovereign credit ratings by a notch.

The euro was steady at $1.2119, while the yen was the only major to cede ground to the greenback as rising US Treasury yields drew investment flows from Japan.

Benchmark 10-year Treasury yields rose to 1.3940%, their highest since Feb. 2020 and the dollar was up 0.2% to buy 105.73 yen.

With local yields anchored by the Bank of Japan, the yen remains particularly sensitive to the US bond market, and has dropped 2% this year while US ten-year yields have climbed nearly 50 basis points.

Sovereign yields elsewhere in Asia have gained in tandem, or in the case of Australia and New Zealand far in excess of US rates, leaving little or no relative benefit for the dollar, as investors begin to price in a pickup in global inflation.

"There's a tide of higher rates across the board, and whether the US does an extra five basis points than Germany is neither here nor there," said Jason Wong, senior market strategist at BNZ in Wellington.

"The bigger picture is (the United States) has got massive debt issuance for stimulus and to find a buyer for that debt you either need higher rates or a lower currency or both, and at the moment we're getting both."

The US dollar index was steady at 90.355.