Dollar languishes amid pandemic aid optimism, pound meanders

By Kevin Buckland

TOKYO (Reuters) - The dollar languished near a 2-1/2-year low on Tuesday with demand for safe-havens flagging as U.S. lawmakers pushed forward with a COVID-19 relief package.

The House of Representatives voted on Monday to increase stimulus payments to qualified Americans to $2,000 from $600, sending the measure on to the Senate for a vote.

Last week's Brexit agreement, while bare bones, also supported the outlook for global growth, lifting Asian stocks on Tuesday following Wall Street gains.

"Optimism abounds, and it’s generally coming from equity markets," said Bart Wakabayashi, Tokyo Branch manager of State Street (NYSE:STT) Bank and Trust.

"The dollar is very heavy, and that will continue into next year."

The dollar index was little changed at 90.194 in holiday-thinned trading, hovering near the 89.723 level reached on Dec. 17 for the first time since April 2018.

Short positions on the dollar swelled in the week ended Dec. 21 to $26.6 billion, the highest in three months, according to Reuters' calculations based on data released by the Commodity Futures Trading Commission on Monday.

The euro rose 0.1% to $1.22260 early in the Asian session, hovering near the 2-1/2-year high of 1.22735 touched earlier this month.

The dollar bought 103.740 yen, another haven asset.

Sterling rose 0.1% to $1.3477 following a two-day decline. It was as high as $1.3625 this month, a level not seen since May 2018.

Investors have taken profits in the UK currency following the confirmation last week of a Brexit trade deal that was widely expected.

While the agreement came as a relief to investors, the pact leaves Britain far more detached from the EU, analysts say.

"People are still trying to figure out what this Brexit agreement means," weighing on the pound, said State Street's Wakabayashi.

"Nothing has really been agreed on financial markets, and that’s a big negative for the UK."

Bitcoin slipped 0.8% to $26,841, continuing its retreat from the all-time high of $28,377.94 set Sunday.

Dollar Drifts Lower as Trump Signs Stimulus Bill

 

By Geoffrey Smith 

Investing.com -- The dollar edged lower on Monday after President Donald Trump finally signed the government spending and corona-virus relief packages, after a bizarre intervention before the Christmas holiday in which he took issue with a number of spending proposals previously approved by his administration.

By 4 AM ET (0900 GMT), the dollar index, which measures the greenback against a basket of advanced economy currencies, was down 0.3% at 89.953, only 0.3% above the two-year low that it posted earlier in December.

In a holiday-thinned market, the signing of the bill removes a lingering source of uncertainty, encouraging the embrace of riskier assets, as people position for a global recovery in 2021.

“Easy financial conditions, positive vaccine news and prospects of a big rebound in global trade growth has led to a benign environment for EM FX,” analysts at Nordea said in a weekly research note, highlighting the Brazilian real, Mexican peso and South African rand as particularly well placed to benefit from the rollout of anti-Covid-19 vaccines next year.

Also supporting risk sentiment is the agreement between the EU and U.K. over their trading arrangements in the new year, which appears to have averted the threat of chaos at the border from January 1^st (even though the closure of the Channel Tunnel before Christmas due to the latest Covid-19 scare was just as effective in disrupting trade).

However, Sterling is showing signs of flagging after an initial boost. By 5 AM ET, it was flat against the dollar at $1.3551, while it was down 0.3% against the euro at 1.1071. Over the weekend, it became apparent that many key questions on the details of the new arrangements remain unanswered, including – crucially for the U.K. economy – the level of access to the single market allowed to Britain’s financial services sector.

"“We do not see this as any game-changer for markets," analysts at Toronto Dominion Securities said in a note to clients. "A deal was in the price and the specifics are unlikely to have any bearing on the direction of markets from here. While GBP is very cheap across many of our valuation models and much of the negotiation-linked uncertainty can fade, there is still significant economic underperformance and disruptions to follow early in 2021.”

The EUR/USD benefited more, rising 0.3% to $1.2237, within touching distance of its highest level since April 2018. It also rose 0.5% against the Swiss franc to a six-month high of 1.0885, another cross that pointed to a general drop in fear. The only currency in Europe stronger than the euro was the Polish zloty, which resumed its upward trend after a week in which the central bank intervened on the currency markets to stop it appreciating.

Dollar Down, With COVID-19 Worries Overshadowing Prospect of Vaccine

Investing.com – The dollar was down on Monday morning in Asia, with optimism over a potential early rollout of COVID-19 vaccines offset by global economic restrictions to curb the spread of the virus.

The U.S. Dollar Index, which tracks the greenback against a basket of other currencies slipped 0.34% to 103.145 by 12:12 AM ET (4:12 AM GMT).

The FDA is looking to grant approval in mid-December for distribution of BNT162b2, the vaccine candidate produced by Pfizer Inc (NYSE:PFE) and German partner BioNTech (F:22UAy), chief scientific adviser for “Operation Warp Speed” Moncef Slaoui said. The first people in the U.S. could be inoculated a day after the approval.

The U.K. could also grant regulatory approval to BNT162b2 this week.

However, millions of Americans are expected to flout warnings to stay home for the upcoming Thanksgiving holiday, raising fears that the mass movement could increase the number of second wave cases in the country exponentially. Across the Atlantic, Germany, dealing with its own second wave, could see its current lockdown extended until mid-December.

The lack of consensus in the U.S. Congress concerning a deal on the latest stimulus measures has also led to speculations that the Federal Reserve could ease monetary policy even further. The spat between the Fed and the Treasury Department over the termination of some emergency lending programs during the previous week also fed this speculation.

The minutes of the Fed’s last policy meeting, to be released on Wednesday, will now be scrutinized for confirmation that Fed policymakers discussed adding to the central bank’s asset-buying plans.

“The minutes should help gauge whether our call for a lengthening of the maturity mix as soon as the December meeting remains on track,” TD Securities analysts said in a note.

The AUD/USD pair lost 0.59% to 0.5763 and the NZD/USD pair X X% to X

The USD/CNY pair X 0.05% to 7.0983 and the GBP/USD pair gained 0.13% to 1.1656

The USD/JPY pair was down 0.6% to 110.14. Japanese markets are closed for a holiday, resulting in sparse liquidity and investor reluctance to test major chart barriers on several dollar pairs.

Meanwhile, the euro edged up against the dollar, but continues a struggle to break above the $1.993 resistance level that it also failed to breach during the previous week.

However, some investors remain bullish on the single currency’s longer-term outlook.

“We think that the exchange rate will rise further over the next few years against a backdrop of lower euro-zone stability risks; an increased real yield gap between the euro-zone and the U.S.; and a continued recovery in the global economy,” Capital Economics analysts said in a note.

The note also raised its forecasts for the euro, now seeing it at $1.2500 by the end of 2021 and $1.3000 at the close of 2022, against the previous $1.2000 and $1.2500 respectively.

European Markets Seen Mixed; New U.S. Relief Package Just Delayed?

Investing.com - European stock markets are seen opening mixed Wednesday, as investors digest the news that President Donald Trump has ended negotiations over a new coronavirus aid package.

At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.9% higher, CAC 40 futures in France fell 0.2% and the FTSE 100 futures contract in the U.K. was flat. 

President Donald Trump ended talks on Tuesday with Democrats on a new stimulus package for his pandemic-hit country, tweeting that after he wins the presidential election in November “we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”