Dollar boosted by safe-haven bid after retail frenzy wounds risk sentiment

The safe-haven dollar found support on Monday with traders wary of the tension in Wall Street between retail and hedge fund investors.

Doubts about the size of the Biden fiscal stimulus and slow vaccine rollouts also weighed on the market, with traders rushing for safer assets.

Several Republican senators are urging Biden to downsize his proposal from a $1.9 trillion package to a $600 billion alternative.

Meanwhile, Wall Street is bracing for higher volatility as retail investor groups launched an attack on hedge fund short positions via social media. Some traders are worried that the wild swings in stocks like GameStop could lead to a market correction. 

The dollar index stood at 90.58 in early trade, holding on to last week’s gain. The dollar fell 0.1% to 104.63 against the yen, further dropping from the 1 ½-month high of 104.94 hit on Friday.

The euro steadied at $1.2132 as it traded in a narrow range. The risk-sensitive Aussie fell as low as 76.06 U.S. cents in early trade before rebounding to 76.307 cents.