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The U.S. Dollar Declined on Wednesday. What about the Yen?

The dollar index tumbled down at 91.19 against a basket of major currencies on Wednesday, trading near the lowest level since late April 2018 it hit overnight.

 

Investors contemplated the likelihood of further a fiscal stimulus in the United States. Meanwhile, riskier currencies held onto their gains as traders’ confidence improved.

 

The Euro and the New Zealand dollar steadied after skyrocketing overnight to their two 1/2-year highs. On the other hand, the greenback weakened broadly due to hopes for a Covid-19 vaccine and additional U.S. fiscal stimulus.

 

On Tuesday, U.S. Senate leader Mitch McConnell stated that Congress should include a new wave of Covid-19 stimulus in a $1.4 trillion spending bill.

 

At the same time, recently elected U.S. President Joe Biden announced that his priority is getting a generous aid package through Congress. However, it seems traders are taking reports into consideration.

 

Masafumi Yamamoto, the chief currency strategist at Mizuho Securities, noted that the Forex market is skeptical whether negotiators could agree on these proposals in a swift manner.  

 

Weaker-than-expected U.S. manufacturing activity data also weighs on the safe-haven dollar, along with speculation that the Fed will act to support the economy before vaccinations become available.

 

How did European and Asian currencies trade?

The greenback traded at 104.41 against the Japanese yen. Meanwhile, the Euro held ground versus the dollar after it hit its highest point since May 2018. The common currency last stood at $1.2071.

Analysts think that the Euro could be pressured as traders grow concerned that the European Central Bank could act against the fast rise.

 

On the other hand, the British Pound remained near a three-month peak against the dollar. Times Radio announced that Brexit trade deal talks had entered the “tunnel” stage of negotiations, prompting the currency’s boost. The Sterling was little changed at $1.3415 on Wednesday.

 

The risk-sensitive Aussie dollar strengthened to 0.7373 per dollar. The New Zealand dollar traded at $0.7068, remaining steady near the highest level since April 2018.

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