The dollar is up more than 1.5% against a basket of other major currencies since its recent low, confounding expectations of a tumbling greenback in 2021. Some investors and analysts expect any strength to be short-lived.
The ICE U.S. Dollar index rose to almost 91 Monday while U.S. stock and bond markets were closed, according to FactSet, up from 89.4 on Jan. 5, which had been its lowest level since mid-April 2018.
The dollar’s recovery comes as Janet Yellen, Joe Biden’s nominee for Treasury secretary, is expected to signal that the new administration will depart from President Trump’s regular demands for a weaker dollar. The former head of the Federal Reserve plans to affirm a commitment to market-driven exchange rates when she testifies in Senate hearings on Tuesday, The Wall Street Journal reported.
“This just rubs in this doubt among investors” who have bet heavily against the dollar, said Jane Foley, head of foreign-exchange strategy at Rabobank.
In futures markets, investors have piled into bets on a weakening dollar. Net bets against the dollar are almost as high as they were in late September, according to an analysis of Commodity Futures Trading Commission data by the Royal Bank of Canada , which was the most negative the market had been since April 2018.