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Oct 5, 2020

Currencies | The Dollar: Dollar dips as stimulus hopes boosts risk sentiment

 

3 minutes - Source: CNBC


U.S. one-hundred dollar banknotes are arranged for a photograph in Hong Kong on April 15, 2019.

U.S. one-hundred dollar banknotes are arranged for a photograph in Hong Kong on April 15, 2019.

Paul Yeung | Bloomberg | Getty Images

The safe-haven U.S. dollar dipped on Monday and riskier currencies outperformed as risk appetite improved on optimism that lawmakers in Washington will reach a deal for new stimulus to blunt the economic impact of the coronavirus.

Stocks opened higher on Monday on the stimulus hopes and as doctors said that U.S. President Donald Trump could be discharged from the hospital where he is being treated for COVID-19.

“There is definitely some more optimism around fiscal stimulus coming down the pike,” said Erik Nelson, a macro strategist at Wells Fargo in New York.

U.S. House Speaker Nancy Pelosi said on Sunday progress was being made on coronavirus relief legislation.

Failure to reach a deal, however, would likely be positive for the dollar, which on Monday fell 0.41% against a basket of major currencies.

“We think that the prospects for stimulus before the election are still very low,” Nelson said. “We’re of the view that we should fade this dollar weakness we’re seeing today, and in particular against some of these higher risk currencies like the Norwegian krone or the Australian dollar.”

The euro gained 0.57% to $1.1783, the highest since Sept. 21.

The Australian dollar rose 0.35% to $0.7187 and the greenback dipped 0.76% to 9.2296 krone .

Trump’s COVID-19 diagnosis is adding an extra layer of uncertainty to how the U.S. Nov. 3 presidential election will play out, and what it could mean for the greenback.

“There isn’t a clear consensus on how the dollar should trade on this degree of political uncertainty in the U.S.,” said Jane Foley, senior FX strategist at Rabobank.

Trump could be discharged from the hospital where he is being treated for COVID-19 as soon as Monday, according to his doctors, although his condition remained unclear and outside experts warned it could be severe.

The U.S. Federal Reserve will release minutes from its September meeting on Wednesday and the European Central Bank will release its latest meeting minutes on Thursday.

Sterling gained 0.43% to $1.2986.

British Prime Minister Boris Johnson and the head of the EU’s executive, Ursula von der Leyen, agreed in a phone call on Saturday to step up Brexit talks to close “significant gaps” barring a new trade partnership.

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