A representation of virtual currency Bitcoin is seen in front of a stock graph in this illustration taken on 8 January 2021.
A representation of virtual currency Bitcoin is seen in front of a stock graph in this illustration taken on 8 January 2021.Reuters file photo

The dollar slumped to its lowest in a week on Tuesday as investors began entertaining doubts about the scale of a recent rally driven by expectations of a faster pandemic recovery in the United States than elsewhere.

The spotlight remained on bitcoin as it reached a record above $47,000, building on a nearly 20 per cent surge overnight that was the biggest since 2017, after Tesla Inc announced a $1.5 billion investment in the digital asset.

The dollar index weakened 0.2 per cent to 90.75 in the Asian session, and dipped to 90.963 for the first time since 1 February.

The US currency has been in retreat since Friday, when disappointing jobs data knocked the wind out of a two-week run that had lifted it to a more than two-month high of 91.6.

Investors had pushed up the greenback thanks to a faster US vaccine rollout relative to most other countries, and as Democrats moved to fast-track president Joe Biden’s $1.9 trillion COVID-19 relief package.

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Many analysts, though, see that massive fiscal spending coupled with continued ultra-easy Federal Reserve monetary policy dragging down the dollar in the longer term.

“The bottom line is a large stimulus is highly likely to pass soon, exacerbating the widening in the US current account deficit, and weighing on the USD,” Commonwealth Bank of Australia currency analyst Joseph Capurso said in a client note.

Europe’s “lagging” vaccination program will cap the euro near-term but the continent should catch up by the summer, after which the single currency could rally to $1.28 for the first time since 2014, he said.

The euro rose 0.2per cent to $1.20775 on Tuesday, up from the two-month low of $1.9520 touched Friday.

The British pound renewed its highs since May 2018 by climbing to $1.3784 in Asia. It last traded up 0.3 per cent at $1.3774.

The dollar slipped 0.3 per cent to 104.925 yen, after strengthening to 105.765 at the end of last week for the first time since October.

Elsewhere, Tesla sent bitcoin surging by saying in its 2020 annual report on Monday that it had bought $1.5 billion of the world’s most popular cryptocurrency as part of its broad investment policy, and that it expected to begin accepting the digital asset as payment for its products “in the near future.”

“This is a turning point for how we view digital currencies,” said Junichi Ishikawa, a foreign-exchange strategist at IG Securities in Tokyo.

“From here on, bitcoin will be genuinely considered as an asset available for selection by asset managers in their portfolios.”

Bitcoin traded at $46,400 after pushing to a new record at $47,565.86 on Tuesday.

Rival virtual currency ethereum changed hands at $1,733.14 after reaching an unprecedented $1,784.85 on Monday.

Riskier fiat currencies also received a boost as rising stock markets buoyed sentiment.

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The Australian dollar gained 0.3per cent to 77.252 US cents, while its New Zealand peer added 0.4 per cent to 72.47 US cents.

Westpac is targeting an advance to 75 US cents for New Zealand’s currency, strategist Imre Speizer wrote in a client note published Tuesday.

“Markets have acknowledged NZ’s successful Covid management and ensuing economic recovery, but recent economic data has surprised even the most optimistic pundits,” the note said.

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