* Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
By Saikat Chatterjee
LONDON, Feb 9 (Reuters) - The U.S. dollar was firmly pinned
at a one-week low on Tuesday as an overnight slide in U.S.
Treasury yields raised doubts on the outlook for the greenback
against the backdrop of a looming U.S. fiscal stimulus package.
Investors have pushed up the dollar recently as Democrats
moved to fast-track President Joe Biden's $1.9 trillion COVID-19
relief package. But some analysts say massive fiscal spending
coupled with continued ultra-easy Federal Reserve monetary
policy will ultimately prove to be a dollar headwind.
"There has been an impressive pullback in U.S. Treasury
yields overnight which is causing the broad-based dollar
weakness before the bond auctions this week," said Kenneth
Broux, a strategist at Societe Generale in London.
In Monday's trading, ten-year U.S. Treasury yields
US10YT=RR rose to near March 2020 highs as investors bet on a
broader reflationary theme in the financial markets. But it has
slipped back to 1.16%, down 4 bps from the overnight highs.
Tuesday raised familiar doubts among investors, with some
traders saying the fresh fiscal stimulus along with record low
U.S. interest rates will weigh on the currency in the coming
months.
"Whereas until recently the prospect of fiscal support
caused positive reactions on the markets, the market no longer
seems to be entirely certain about that any longer," Commerzbank
strategists said.
The dollar index .DXY was 0.5% lower at 90.50 in London
trading, its lowest level since Feb. 1.
Disappointing U.S. jobs data on Friday knocked the wind out
of a two-week run that had lifted the dollar =USD to a more
than two-month high of 91.6.
BLISTERING BITCOIN
The biggest beneficiary of the weakening dollar was
cryptocurrencies with bitcoin BTC=BTSP rocketing above
$48,000, building on a nearly 20% surge overnight after Tesla
Inc TSLA.O announced a $1.5 billion investment in the digital
asset.
The yen JPY=EBS was another major beneficiary of the weak
dollar trend, with the Japanese unit rising 0.5% against the
U.S. dollar to 104.69 yen.
The yen has become increasingly correlated with outright
yields than an indicator of broad risk sentiment. A 90-day
rolling correlation between yen and U.S. yields has strengthened
considerably since the final quarter of 2020.
Elsewhere, the euro EUR=EBS rose 0.5% to $1.2099 on
Tuesday, up from a two-month low of $1.1952 touched Friday.
The British pound GBP=D3 revisited its highs since May
2018, climbing to $1.3784 in Asia. It last traded up 0.3% at
$1.3774.
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World FX rates https://tmsnrt.rs/2RBWI5E
USD-POSITIONS https://tmsnrt.rs/36UYmsX
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