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After hitting multi-year lows against sterling and the Australian dollar on Monday, the U.S. dollar pared losses as traders concentrated on whether vaccine development, faster economic growth expectations and inflation would drive higher bond yields.

Before withdrawing as Europe’s trading session progressed to noon, yields on 10-year U.S. and German government bonds hit one-year and eight-month highs respectively.

During the night, the U.S. dollar index rebounded from lows hit but slowed steadily and was essentially unchanged, down 0.03 percent at 90.255.

Kit Juckes, a strategist at Societe Generale, said, “Monday mornings don’t necessarily tell me much”, adding that once trading resumes in New York, a clearer trend could emerge.

“The market is still short in dollars”, he said, pointing out to the likelihood of a “shake out” should U.S. yields continue their rise towards 1.5%.

The euro gained against the dollar, rising 0.17 percent to $1.2138 after data showed that, thanks in particular to the robust industrial sector, German company morale improved more than anticipated in February.

Traders were also waiting for European Central Bank President Christine Lagarde’s speech at 1345 GMT.

Commerzbank analyst Ulrich Leuchtmann has argued that the growth gap between the two economies is at stake in the relationship between the euro and the dollar.

“Where EUR-USD is going to go medium-term depends on whether the U.S. economy really will be able to achieve a stronger post-lockdown boom than Europe”, he said. In that regard, he expects the popular currency to struggle in the first half of 2021.

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After hitting 1.4050, its highest since April 2018, the British pound kept the $1.40 line, as Prime Minister Boris Johnson declared a roadmap out of lockdowns on the back of accelerated vaccinations.

Before letting the dollar return to 0.7889, the Aussie climbed as much as 0.5 percent to an almost-three-year high of $0.7908.

The kiwi reached $0.7338, also its highest since early 2018, backed by a notch of S&P’s upgrade of New Zealand’s sovereign credit ratings, but also saw some losses in the U.S. dollar.

Bitcoin eased from the record high of $58,354.14 it hit over the weekend in the crypto-currency market, retreating to $53,441.

The most famous cryptocurrency has almost doubled year-to-date and on Friday hit a $1 trillion market capitalization, boosted by gaining acceptance among mainstream investors and businesses such as Tesla Mastercard.

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