Investing.com – The dollar traded higher against a basket of major currencies as investors eyed a raft of upcoming US debt auctions this week to gauge investor appetite for US assets ahead of the release of the minutes from the Fed’s January policy meeting.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.59% to 89.61.
The U.S. Treasury is preparing to sell more than $250 billion worth of new debt this week, to fund the growing deficit in the wake of recent tax cuts and plans to ramp up government infrastructure spending. The upcoming issuance of new debt pressured Treasury prices, boosting yields, which in turn, underpinned dollar momentum.
Others suggested, however, that profit taking in rival currencies like the euro, yen and sterling has been the main driver of dollar strength seen Tuesday. Data showed a fall in negative investor sentiment on the greenback as traders rein in their bearish bets. Large speculative net short US dollar bets slipped to six-week lows in week to February 13, CTFC Commitment of Traders report showed.
Sterling, however, was one of the few currencies that held steady against the greenback on Tuesday, supported by a Reuters reported, citing unnamed sources, that the European Parliament is working on a proposal calling for the European Union to negotiate an “association agreement.” The agreement was said to give Britain “privileged” access to the single market and membership agencies.
Yet, some market participants remained sceptical as the proposal appears to contradict the position of EU chief Brexit negotiator, Michel Barnier, who suggested last week that the UK was destined to exit both the single market and customs union.
Action Economics said the proposal of granting Britain “privileged access” would come against a number of hurdles not least time constraints as it would take a multi-year timeframe until such a bespoke deal would be ratified by EU members.