Dollar Slumps to 6-Week Low, Bitcoin Steadies After Weekend Drop

LONDON—The dollar slumped to a six-week low against major peers on Monday, with Treasury yields near their lowest in five weeks, after the U.S. Federal Reserve reiterated its view that any spike in inflation was likely to be temporary.

The dollar was also held down by improved risk sentiment amid a rally in global stocks to record highs.

Bitcoin stabilized after losses from Sunday, when it plunged as much as 14 percent to $51,541, which a report attributed to news of a power outage in China.

The dollar index, which tracks it against six other currencies, fell to 91.079, not far from last week’s low of 91.484, a level not seen since March 18.

The greenback’s weakness was pronounced across the board on Monday, with the currency hitting multi-week lows against major peers in the G10 group of currencies: the Japanese yen, the Swiss franc, the Australian dollar and the New Zealand dollar, and the euro.

The 10-year Treasury yield sank as low as 1.5280 percent last week from 1.7760 percent at the end of last month, its highest in more than a year.

“Indeed, the USD rally is all-but-distant memory by now and the currency’s underperformance seems to reflect the apparent divergence in the outlook between the slumping UST yields and the rather perky bond yields elsewhere,” said Valentin Marinov, head of G10 FX research at Credit Agricole.

“This is almost the exact opposite of the moves we saw in March and, given that the U.S. fundamentals have improved sharply since March, the UST yield drop could reflect the negative impact of the huge cash injection from the unwinding of the TGA that started last month.”

The euro rose above $1.20 for the first time in over six weeks, touching a high of $1.2048 by midday in London. The European Central Bank meets on Thursday with internal divisions over the pace of bond buying, extended COVID-19 lockdowns and potential delays to the EU recovery fund forming the backdrop.