Dollar edges off of seven-week lows amid stimulus uncertainty

Cornelia Mascio
Ottobre 23, 2020

THE US dollar edged up from seven-week lows on Thursday as hopes for a fiscal package in the United States before the November elections crumbled again, and the global surge in Covid-19 cases fuelled demand for safe-haven assets like the greenback.

The dollar index ticked higher on Thursday, easing off a seven-week low as hopes for a coronavirus aid package ahead of the USA elections faded and COVID-19 cases surged around the world, giving a slight bid to safe-haven assets like the greenback.

The talks had been thrown into doubt after Republican President Donald Trump took to Twitter late on Wednesday to accuse Democrats of being unwilling to find an acceptable compromise and amid deep opposition among Senate Republicans to a large new stimulus package.

"Yesterday's moves were so significant, and with no new news to follow through on, there is a modest recovery in the dollar".

The dollar index was almost flat against a basket of currencies at 92.792, having marked its lowest level since Sept 2 overnight.

The euro EUR=EBS was down 0.35% higher versus the dollar at $1.1820, after hitting a one-month high of $1.18805 on Wednesday.

The US dollar was firmer against Japan's currency at 104.73 yen, above a one-month low hit during the previous session at 104.345.

News that Europe has seen the number of coronavirus cases surge to a record high, with Spain becoming the first Western European country to exceed 1 million infections, added to the cautious tone in world markets.

Having hit six-week highs on Wednesday amid Brexit optimism, sterling pulled back against the USA currency. The British pound was last down 0.4 per cent at US$1.3093.

In point of fact, a sharp softening of the US Dollar Index on Wednesday's FX market came forth as the Trump Administration and the Congressional Democrats appeared to have narrowed down their differences on a second-round of trillion-dollar stimulus package, heightening up appetite for the riskier assets, while the US President Donald Trump was quoted saying that he meant to accept an upscaled stimulus bill despite growing oppositions from his own Republican lawmakers.

Elsewhere, the Chinese yuan retreated from a 27-month high on signs that the authorities have become increasingly wary over the recent rapid gains in the currency.

The Australian dollar eased as E-mini futures for the S&P 500 lost more than 0.6%; the Aussie was last fetching 0.7105, while the kiwi fell 0.32 to 0.

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