SINGAPORE (Reuters) – The dollar was pinned near a one-week low on Wednesday as investors optimistic about the prospects for a pre-election U.S. stimulus package sought riskier currencies.
The White House and Democrats have moved closer to agreement on a new coronavirus relief package as President Donald Trump said he was willing to accept a large aid bill despite opposition from his own Republican Party.
“I want to do it even bigger than the Democrats,” Trump said in an interview with Fox News on Tuesday. Democrat and House Speaker Nancy Pelosi, when asked whether an agreement could be reached next week, told reporters: “I hope so. That’s the plan.”
That pushed the dollar index down 0.4% to a one-week low of 92.991. It sat just above that level in Asia trade.
Stimulus is seen as a short-term weight on the dollar because the spending would support the U.S. economy and improves market sentiment, driving investors into riskier assets.
The euro led gains to hit a one-month high of $1.1841 and held at $1.1828 in Asia. U.S. bonds were sold and the safe-haven yen was also on the back foot, though it recovered from a one-week low to sit at 105.49 per dollar on Wednesday.
The usually risk-sensitive Antipodean currencies lagged broad gains on the dollar, weighed by the prospect of negative rates in New Zealand and monetary easing in Australia. Brexit worries also kept a lid on the pound.
“All eyes are on whether a U.S. stimulus bill is agreed upon,” Kim Mundy, currency analyst at the Commonwealth Bank of Australia in Sydney, said in a note.
“If U.S. policymakers manage to agree on fiscal deal, the dollar can edge lower especially against commodity sensitive currencies,” she said.
“But without a more aggressive U.S. fiscal thrust, the U.S. economic recovery is at risk and the dollar is vulnerable to a renewed bout of strength in the short-term.”
The Chinese yuan, meanwhile, is flying high on China’s world-leading economic recovery. It crept higher in offshore trade ahead of the onshore open at 0130 GMT and sits just shy of a more than two-year peak made on Tuesday. [CNY/]
Later on Wednesday, preliminary Australian retail sales figures are due. At 0730 GMT, European Central Bank President Christine Lagarde and chief economist Philip Lane host a broad strategy review event in Frankfurt.
The U.S. Federal Reserve releases its “Beige Book” economic survey at 1800 GMT.
Currency bid prices at 8:03AM (0003 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Euro/Dollar $1.1830 $1.1821 +0.08% +5.53% +1.1831 +1.1823
Dollar/Yen 105.4500 105.4700 +0.00% -2.90% +105.5200 +105.4650
Euro/Yen 124.74 124.71 +0.02% +2.29% +124.8300 +124.7000
Dollar/Swiss 0.9068 0.9071 -0.02% -6.28% +0.9070 +0.9067
Sterling/Dollar 1.2956 1.2947 +0.05% -2.33% +1.2957 +1.2952
Dollar/Canadian 1.3119 1.3129 -0.05% +1.02% +1.3128 +1.3118
Aussie/Dollar 0.7051 0.7048 +0.04% +0.49% +0.7058 +0.7047
NZ 0.6581 0.6580 +0.00% -2.21% +0.6583 +0.6577
Tokyo Forex market info from BOJ
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