Dollar index snaps three-day winning streak, fund manager warns of greenback strength in 2021

• The dollar index fell 0.41% on Tuesday as the US 10-year yield ended a five-day winning trend. 
• A strong dollar will be a key theme to watch out for in 2021, according to a fund manager.

The dollar index, which tracks the greenback's value against majors, fell by 0.41% on Tuesday, ending a three-day winning run, which saw the battered index rise from 89.32 to 90.73, tracking an uptick in the US treasury yields. 

The 10- and 30-year yields have risen sharply in recent days, with oil rally and expectations for bigger fiscal stimulus under Joe Biden's presidency lifting inflation expectations to multi-month highs. Biden is expected to announce stimulus on Thursday. 

Julien Bittel, Fund Manager at Pictet Asset Management, believes the dollar may catch the bears off guard this year. The oversold currency has recently broken out of a falling wedge, confirming a reversal higher. 

Similar breakouts observed in early 2011, 2014, and 2018 paved the way for significant gains, as noted by Bittel. History could repeat itself if the Treasury yields continue to rise, putting pressure on the equity markets, boosting haven demand for the US dollar. 

Technical levels