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Dollar Morphs Into Risk-On Currency Amid U.S. Growth Hopes
Bloomberg 2/5/2021 Masaki Kondo
(Bloomberg) Hopes for the U.S. economic recovery seem to be transforming the dollar from a haven asset to the risk-on currency of choice.
The currency has been rising in tandem with global equities after three weeks of divergence. Their inverse correlation weakened to minus 0.46 from a peak of minus 0.73 in July. The Bloomberg Dollar Spot Index showed its changing colors Friday by dropping 0.4%, the most in three weeks, after a report showed the U.S. added fewer jobs than expected in January.
The greenback’s turnaround is shaking up a consensus on Wall Street that a strengthening recovery would weigh on havens such as the dollar. The opposite appears to be happening, as the prospect of more-generous U.S. government spending from the Biden administration and rising Treasury yields have spurred the currency.