U.S. Dollar Wavered Wednesday. What About Other Currencies?
The U.S. dollar struggled against major currencies on Wednesday. Investors turned to riskier currencies due to the hopes about pandemic recovery, along with uncertainty about U.S. fiscal stimulus and Brexit.
The British pound recovered after a three-day decline. Deadline approaches for London to reach a trade deal with Brussels before Britain exits from the European Union at year-end.
On Wednesday, the dollar index changed slightly at 90.447, after surging forward by 0.5% on Tuesday. Thus far, it still remains on track for a more than 6% loss this year.
It seems the forex market positioned for a Covid-19 pandemic recovery that lifts global growth, lowering demand for the dollar and other safe-haven currencies. On the other hand, the riskier Australian dollar soared by 0.5% to $0.75515. The euro also climbed up by 0.2% to $1.21875. The Sterling jumped by 0.2% to $1.3384 as well, on track to end a three-day decline.
Shinichiro Kadota, the senior currency strategist at Barclays Capital in Tokyo, noted that investors have some concerns about coronavirus and about Brexit. However, it’s not reached the point where the positive sentiment has turned. He expects the dollar to remain weak.
The U.K. leaves the EU’s trade orbit in days, and the sterling has vacillated as it is waiting for signs of progress in negotiations.
How did Asian currencies fare?
The dollar lowered by 0.1% to 103.47 Japanese yen, another traditional safe-haven. It also changed insignificantly at 6.5402 Chinese yuan in the offshore market. The greenback traded at 6.5495 yuan on-shore.
Meanwhile, U.S. Congress passed an $892 billion coronavirus aid package. Vaccine rollouts are also gaining momentum. While there were some reports that the authorities may hinder the bill, traders weren’t deterred from such rumours thus far. According to Kadota, the muted reaction suggests that the FX market expects the bill to pass in some form.
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