U.S. Dollar is Still Low. How Are Other Currencies Faring?

The U.S. dollar index traded near Friday’s two-and-a-half-year low on Monday. Last week weak U.S. jobs data heightened traders’ expectations of economic aid. Meanwhile, sterling plunged as Britain, and the European Union made another attempt to strike a trade deal.

On Dec. 31 the United Kingdom leaves the EU’s orbit and investors’ fears of a chaotic no-trade deal Brexit increase.

On Friday, jobs data showed non-farm payrolls soared by 245,000 in the United States last month. It’s the smallest gain since May, a sign the jobs recovery is slowing during the third wave of Covid-19 infections.

Lee Hardman, the currency analyst at MUFG, stated that the recent loss of momentum is problematic as it suggests that it will take longer to reverse the negative hit to the U.S. labour market from the coronavirus pandemic shock, especially considering renewed disruption from the third wave. He also added that this would increase pressure on both the Fed and Congress to deliver further stimulus aid.

On Friday, talks aimed at delivering new Covid-19 relief gathered momentum in the U.S. Congress. A bipartisan group of lawmakers is working on finishing a $908 billion bill. Investors expect to see a final version of the proposed legislation earlier this week. Furthermore, the Federal Reserve will likely make more adjustments to its quantitative easing later this month.

According to Hardman, the increasing speculation over looser U.S. fiscal and monetary policies provides support for riskier assets, while also weighing on the U.S. dollar in the current trading environment.

The dollar index against a basket of currencies inched up by 0.1% at 90.96 on Monday, close to 90.47. However, it remains near its weakest point since April 2018.

U.S. dollar especially weakened against certain currencies

The greenback sell-off has extended further with weakness most evident versus the Euro, the Swiss franc, and the Canadian dollar during the past week.

The Euro tumbled down by 0.1% to 1.2107. Despite that, the common currency remained close to $1.2177, its highest point since April 2018.

Meanwhile, the British pound also plummeted down 1% at $1.3287. Furthermore, it dropped down by 1% against the Euro at 91.07 pence.

At the same time, the Norwegian crown tumbled down by 0.8% at 8.8590 versus the U.S. dollar, while shaving off 0.5% versus the Euro at 10.7255. The currency had touched a two-and-a-half-week low of 10.7340 earlier. The Australian dollar plunged by 0.2% at 0.7407 versus the U.S. dollar.