The dollar strengthened on Tuesday, following a rise in U.S. bond yields. as investors doubt whether the market's assessment of interest rate cuts this year is justified or not.
On the other hand, in the crypto world, bitcoin is trading near its strongest level since April 2022 on expectations that the Securities and Exchange Commission will soon approve a spot bitcoin exchange-traded fund (ETF).
Money market traders are pricing in about 135 basis points of rate cuts for the Federal Reserve this year, with about a 60% probability that they will start cutting rates in March.
The 10-year bond yield rose 4.5 basis points on Tuesday to 4.0455%. It continued to rise after reaching its lowest level since July at 3.783% at the end of last year.
"Markets are still trying to find a basis in the direction of the Fed and the timing of the first U.S. interest rate cut," added analysts from BofA, who expect the Fed to begin cutting rates at its meeting as early as March.
"The case scenario this time is for a soft landing, a lower US dollar which should generally support risk assets more generally."
The US dollar index, which measures the US dollar against six major currencies, ended up more than 0.1% to 102.42, after rising 1% last week. The euro ended at $1.0934, well off a three-week low of $1.0877, while sterling eased 0.2% to $1.2721.
In Asia, data on Tuesday showed core inflation in Japan slowed for a second month in a row in December, putting some pressure on the Bank of Japan to back away from ultra-loose monetary policy. The yen was little changed after the inflation data was released and last traded at 144.01 per US dollar, up 0.1%.
On the other side, bitcoin is at $46,708, after hitting a 21-month peak of $47,281 in the previous session.
A number of investment managers on Monday revealed the fees they plan to charge for spot bitcoin ETFs.
