Dollar extends rebound as U.S. yields climb

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NEW YORK — The dollar edged higher across the board on Monday, extending a rebound from the near 3-year low hit last week, taking strength from the recent spike in Treasury yields and the prospect of a growth boost from higher U.S. fiscal stimulus.

U.S. President-elect Joe Biden, who takes office on Jan. 20 with Democrats able to control both houses of Congress, has promised “trillions” in extra pandemic-relief spending.

Ordinarily, the extra spending plans would force investors to worry about rising inflation and its detrimental effect on the U.S. dollar in a weak economy, but the currency has been supported in recent weeks thanks to rising U.S. yields.

U.S. government bond yields have logged big moves in recent sessions, with the Treasury yield curve experiencing a significant increase in yields in longer-dated bonds.

Benchmark Treasury yields rose to 10-month highs on Monday as investors priced for higher government spending under the incoming Joe Biden administration and before the Treasury will sell new long-dated supply.

At 99 basis points, the spread between the 2-year and 10-year Treasury yield is at its steepest since July 2017. .

The U.S. dollar index was 0.4% higher at 90.636, it’s fourth straight session of gains. The index fell as low as 89.21 last weak, its weakest since March 2018.

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