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Dollar holds gains as uncertainty weighs on market sentiment

Dollar holds gains as uncertainty weighs on market sentiment

TOKYO (Reuters) – The U.S. dollar held on to gains against most currencies on Wednesday as renewed questions about a coronavirus vaccine and lack of an agreement on additional U.S. fiscal stimulus prompted a shift to safer assets.

FILE PHOTO: U.S. dollar notes are seen in this picture illustration taken at the Bank of Taiwan in Taipei November 11, 2010. REUTERS/Nicky Loh

The yuan was little changed versus the dollar after the central bank’s daily fixing of the yuan’s mid-point was largely in line with estimates, suggesting authorities have paused their attempts to rein in the currency.

The euro and British pound are likely to extend declines, analysts said, as a return of restrictions on economic activity in Europe and Britain to battle a second wave of coronavirus infections unnerves investors.

Currency moves, however, are likely to be subdued as the U.S. presidential election looms on Nov. 3, but analysts said sentiment is leaning against riskier bets, which should support the dollar in the coming days.

“Many factors are pointing to more upside for the dollar,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

“U.S. stimulus may not come until after the election. The People’s Bank of China is halting the yuan’s rise. There’s no reason to buy the euro, and there are a lot of euro longs that need to be unwound.”

The dollar last stood at $1.1744 per euro EUR=D3, holding on to a 0.6% gain from the previous session.

The pound GBP=D3 traded at $1.2932, nursing a 1% loss from Tuesday.

Sterling also took a hit due to worries about little progress in trade talks between Britain and the European Union and the chance the Bank of England will adopt negative interest rates.

Risk appetite has weakened after Johnson & Johnson JNJ.N said on Tuesday

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Dollar lower as investors now believe US economic stimulus will be reached after Nov. 3 election

Dollar lower as investors now believe US economic stimulus will be reached after Nov. 3 election

TOKYO – The dollar flirted with three-week lows on Tuesday as investors stuck to hopes that there will be large U.S. fiscal stimulus after the Nov. 3 election to shore up a pandemic-hit economy, supporting riskier currencies.

The dollar index stood at 93.036, just above Friday’s near-three-week low of 92.997. The euro traded at $1.1841, having gained 0.60% on Monday.

“It seems there is a strong optimism that eventually there will be stimulus. It is hard to argue against fiscal expansion given the coronavirus epidemic is almost like a natural disaster,” said Makoto Noji, chief currency and foreign bond strategist at SMBC Nikko Securities.

DOLLAR’S RECENT DIRECTION POINTS TO BIDEN WIN

While markets are getting sceptical about the chances of having a bipartisan package before the election, a widening lead by Democratic presidential candidate Joe Biden over President Donald Trump is leading investors to expect big stimulus after the election.

A Biden victory is also seen as negative for the dollar partly because his pledge to hike corporate tax would reduce returns from investments in the United States.

The dollar flirted with three-week lows on Tuesday as investors stuck to hopes that there will be large U.S. fiscal stimulus after the Nov. 3 election to shore up a pandemic-hit economy, supporting riskier currencies. (iStock)

Thus the dollar also weakened against currencies that are deemed “safer” – those that tend to have small or inverse relations with risk sentiment – such as the yen and the Swiss franc.

The yen strengthened to 105.34 per dollar while the Swiss franc traded at 0.9102 to the dollar, near its highest in three weeks.

Sterling traded above the key $1.30 level as hopes for a Brexit deal offset concerns about pressure

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