TOKYO (Reuters) – The dollar was trading near two-week lows on Wednesday as demand for safer assets subsided. Traders expect an expected recovery from the COVID-19 pandemic this year, driven by massive fiscal and monetary stimulus.

FILE PHOTO: US $ 100 bills feature in this image illustration taken in Seoul on Feb.7, 2011. REUTERS / Lee Jae-Won

Bitcoin consolidated around $ 46,500 after hitting a new high of $ 48,216 overnight after Tesla announced a $ 1.5 billion investment in the leading cryptocurrency.

“The economic outlook for the year appears to be positive according to market consensus,” said Michael McCarthy, chief strategist at CMC Markets in Sydney, referring to the weaker dollar.

“Sentiment and positioning are currently the most important drivers in the market.”

Traditionally viewed as a safe haven, the dollar has declined against large competitors as optimism about financial and fiscal support from policymakers, robust corporate profits, and the prospect that coronavirus vaccines could accelerate the return to normal in the US and elsewhere set risk sentiment have strengthened.

The dollar index rose to 90.509 at the start of the Asian session on Wednesday after falling to 90.427 for the first time this month for two days.

There was a tug-of-war among dealers over the impact of President Joe Biden’s $ 1.9 trillion stimulus package on the dollar.

On the one hand, it should accelerate a recovery in the US compared to other countries and strengthen the currency. On the flip side, it’s a major driver in a global reflation narrative that should raise riskier assets at the expense of the dollar.

After a strong start to the year for the greenback, the latter view seems to be gaining traction again – according to Westpac analysts, last week’s US job data provided the turning point.

“The disappointing payrolls on Friday flattened the USD completely. This data point casts doubt on the burgeoning US outperformance narrative and re-focuses heads on the prospect of continued reflationary US fiscal and monetary policies,” they wrote on Wednesday in a customer report.

“Maintain conspicuous losses, a test of 90 on the cards in the coming days,” reads the note relating to the dollar index.

The dollar gained 0.1% to 104.68 yen after falling to 104.5 for the first time this month in the previous session.

The euro fell less than 0.1% to $ 1.21105 after a three-day gain.

The British pound fell 0.1% to $ 1.3803 after renewing a nearly three-year high of $ 1.382 overnight.

Adaptation by Jacqueline Wong