Dollar firm amid US yield spike; bitcoin hovers around $60,000

TOKYO: The US dollar held firm on Monday after bouncing off a one-week low last week, supported by a spike in benchmark Treasury yields to more-than-one-year highs as inflation fears continued to smoulder.

Bitcoin hovered around $60,000 after surging to a record high of $61,781.83 over the weekend. Reuters reported on Monday that India will push ahead on a proposal to ban cryptocurrencies, in a potential blow to millions of investors piling into the red-hot asset class.

The greenback rose 0.1% against the yen to 109.125 yen , drifting near its highest since June 2020. The euro was largely flat at $1.19485 after rising last week for the first time in three weeks.

Market participants have grown wary in recent weeks that massive fiscal stimulus and pent-up consumer demand could lead to a jump in inflation as expanding vaccination campaigns bring an end to lockdowns.

"The base scenario is that you see the economic recovery continuing and the vaccine roll-out keeps going and the infection situation improves," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

"Both the dollar and Treasury yields are on the uptrend and there's no big change in that view. The dollar is especially likely to firm against the yen and the euro in the near term, but it doesn't strengthen necessarily against the commodity currencies because commodity prices are rising."

US producer prices had their biggest annual gain in nearly 2-1/2 years, data showed on Friday, while the country's economy is set to get a massive shot in the arm from President Joe Biden's $1.9 trillion stimulus package.

Focus this week will be on the US Federal Reserve's two-day policy meeting although expectations are running low for the central bank to announce major policy changes.

The Bank of Japan is also set to hold its policy meeting later in the week.

The dollar index, which tracks the US currency against six major peers, held around 91.697 in Monday's Asia session after climbing from near a one-week low of 91.364 at the end of last week.

Benchmark 10-year Treasury yields were at 1.6320% on Monday, close to Friday's top of 1.6420%.

The greenback has also been supported by a paring of bets for its decline, with speculators cutting net short positions to the lowest since mid-November in the week ended March 9.

The Australian dollar - viewed widely as a liquid proxy for risk appetite - fell 0.2% to $0.77465, extending Friday's 0.4% loss.

The Canadian dollar was largely flat, after earlier strengthening to C$1.2455 for the first time in three years. On Friday, a bigger-than-expected domestic jobs gain supported the view that the Bank of Canada would reduce quantitative easing purchases next month.

Bitcoin was up about 2% at $60,205.56 after more than doubling in value this year.

India's potential ban on cryptocurrencies comes just as bitcoin and its rivals gained credibility following endorsements from big investors such as BlackRock Inc and corporate leaders including Tesla Inc's Elon Musk and Twitter Inc's Jack Dorsey.