Dollar dips before inflation data, Treasury supply

NEW YORK: The dollar dipped slightly on Monday as traders awaited highly anticipated US inflation and retail sales data in coming days, and as Treasury yields held below recent highs before new supply.

The dollar's performance has been tied to US Treasury yields for most of 2021, after concern about rising inflation in the United States and a stimulus-fuelled economic rebound triggered a jump in Treasury yields.

A fall in US yields last week triggered the worst week for the dollar in 2021. Yields edged higher on Monday before the Treasury will sell $120 billion in new coupon-bearing supply this week, though they are holding below one-year highs reached last month.

US consumer price data for March due on Tuesday is the next major economic focus. Investors are betting that price pressures will increase due to increased fiscal and monetary stimulus and as businesses reopen from COVID-19 related closures.

Comparisons with last year are also likely to be strong, due to a drop in inflation a year ago when businesses closed due to COVID-19.

"With US data expected to come in strong this week, we believe the dollar's rise can continue," analysts at Brown Brothers Harriman said in a report on Monday.

Retail sales data for March is also due on Thursday.

The dollar index was last down 0.11% against a basket of currencies at 92.108. It is holding above a three-week low of 91.995 reached on Thursday.

The euro gained 0.06% to $1.1908.

Federal Reserve Chairman Jerome Powell said on Sunday that the US economy was at "an inflection point" and looked set for a strong rebound in the coming months, but he also warned of risks stemming from a hasty reopening.

Bitcoin traded above $60,000, closing the gap to its record high.

Sterling rose 0.26% to $1.3744 as traders cheered the latest phase of the British government's economic reopening plan.

The dollar fell 0.18% to 109.43 yen versus the Japanese currency.

US dollar net short positions have fallen to their lowest in nearly three years, according to data published on Friday.

ING analysts noted that speculators had cut their net short dollar positions for the 12th consecutive week, which could prove a headwind for further dollar gains.

"At this stage, the dollar has lost all its positioning 'advantage,' having a neutral speculative positioning, which suggests we should no longer see dollar rallies against most G10 currencies exacerbated by the unwinding of USD shorts," they wrote.