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Dollar Inches Up, Continues Rally After Back-to-Back Gains

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·2 min read
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By Gina Lee

Investing.com – The dollar was up on Thursday morning in Asia following its first back-to-back gains in two weeks overnight. Positive U.S. data that continued to raise hopes that the country will see a faster economic recovery from COVID-19 than its global peers.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.02% to 90.938 by 9:14 PM ET (2:14 AM GMT). The index has gained about 1% in 2021 to date, after rebounding from the almost 7% slide recorded in 2020 that extended to a two-and-a-half year low of 89.206 in early January.

The USD/JPY pair inched down 0.04% to 105.81. The yen was almost flat against the dollar on Thursday, after the dollar pulled back from an almost five-month high overnight.

The AUD/USD pair inched up 0.05% to 0.7752 while the NZD/USD pair inched down 0.07% to 7184.

The USD/CNY pair inched down 0.02% to 6.4527. Onshore trading in the yuan resumed as Chinese markets returned from a holiday.

The GBP/USD pair inched up 0.05% to 1.3860.

The euro was steady after dropping 0.5% overnight, the most in two weeks. Bitcoin continued its rally, hovering near a new record high of $52,640 during the previous session. However, the cryptocurrency’s surge of around 58% in February has prompted some investors to warn that the rally could be unstable.

Upbeat U.S. data released on Tuesday gave the greenback a boost. Core retail sales grew 5.9% month-on-month in January, compared to the 1% growth in forecasts prepared by Investing.com and the 1.8% fall recorded in December. The Producer Price Index grew 1.3% month-on-month in January, higher than the forecast 0.4% growth and December’s 0.3% growth. Retail sales grew 5.3% month-on-month in January, against the forecast 1.1% growth and December’s 1% fall.

Progress is also being made on the U.S.’ proposed $1.9 trillion stimulus package, with President Joe Biden meeting labor leaders on Wednesday to canvass support.

The Federal Reserve also released the minutes from its January policy meeting on Wednesday, reinforcing its to let the economy overheat while maintaining an ultra-accommodative monetary policy.

“Biden’s stimulus plans, a steep decline in new infections and rapid vaccine rollout leave the U.S. well positioned to recover sooner than most … that will generate periodic bouts of dollar upside,” Westpac analysts said in a note.

However, alongside other investors, the Westpac analysts expect the dollar to decline in 2021 due to the Fed’s relentless money printing. With that in mind, Westpac recommends fresh dollar index shorts on rallies toward 91.0.

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