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  • The dollar index trades at levels last seen in April 2018. 
  • US yields rise on renewed expectations for US fiscal stimulus. 
  • Risk-on overshadows rising yields and keeps the dollar on the defensive.

Having dived out of the trendline rising from May 2011 and May 2014 lows last week, the dollar index, which tracks the greenback’s value against majors, is now trading at 91.24 – the lowest level since April 2018. 

The greenback is down 0.6% this week despite an uptick in Treasury yields and US inflation expectations. 

The 10-year yield advanced by ten basis points to 0.938% on Monday, the highest level since Nov. 12. The 30-year yield jumped by 12 basis points to 1.67%. Further, long-term inflation expectations, as represented by the 10-year breakeven inflation rate, rose to 1.81%, the highest level since July 2018. 

Bonds took a beating on Congress’ new push for federal aid
to businesses and state and local governments hurt the
coronavirus pandemic. Further, President-elect Joe Biden indicated that he would deliver a bigger relief package, forcing markets to price in a surge in bond supply. 

Some analysts believe the US fiscal largesse and the resulting uptick in yields are positive for the dollar. So far, however, that has failed to materialize. 

The dollar is losing ground, possibly because the renewed prospects of additional US fiscal stimulus are boding well for the risk assets. The greenback could suffer deeper declines in the near-term if the risk-on action continues. 

Technical levels