© Reuters.

By Kevin Buckland

TOKYO (Reuters) – The dollar hovered around its highest in nearly one month on Tuesday with traders expecting U.S. Treasury Secretary nominee Janet Yellen to affirm a more traditional commitment to market-set currency rates when she testifies at Capitol Hill later.

President-elect Joe Biden’s pick to head the Treasury is prepared to say the United States “doesn’t seek a weaker currency to gain competitive advantage”, returning to a more traditional posture after outgoing President Donald Trump often railed against dollar strength.

Biden is set to be inaugurated on Wednesday.

The greenback has started the year with a near 2% rally against major peers, supported by a rise U.S. Treasury yields in response to Biden’s plan for a $1.9 trillion pandemic relief package.

The safe-haven currency fell nearly 7% last year on expectations U.S. monetary policy would stay ultra-loose and on hopes for a post-pandemic global recovery.

The greenback has also been helped recently by an unwinding of bearish bets, with data showing that hedge funds piled up the biggest net short position since May 2011 in the week ended Jan. 12. Such large positions suggest that traders would be relatively more inclined to reduce their positions than add to already big bets.

However, many analysts still expect the currency to eventually resume its march lower during 2021.

An improving economic outlook under increased fiscal spending and accelerated vaccinations, along with ultra-easy monetary policy, will scupper any attempt for a more sustained rally, Commonwealth Bank of Australia analyst Kim Mundy wrote in a note.

“Further USD upside this week will be contained,” she said.

The was 0.1% lower at 90.690 in early Asian trading, after edging as high as 90.94 overnight for the first time since Dec. 21. Trading was subdued with U.S. markets shut for Martin Luther King Jr. Day on Monday.

The dollar was little changed at 103.72 yen, consolidating in a narrow range after reaching a one-month high of 104.40 last week.

The euro rose 0.1% to $1.20855, after dipping to 1.2054 on Monday for the first time since Dec. 2.

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