American Dollar dips to three-week lows on stimulus hopes, bets on Biden victory

by   |  VIEW 1029

American Dollar dips to three-week lows on stimulus hopes, bets on Biden victory

The American currency fell across the board on Friday over a growing market optimism that the bipartisan lawmakers would be able to reach an accord regarding a second-round of trillion-dollar pandemic relief bill, while market participants’ bet that the Democratic Presidential candidate Joe Biden would win the November 3 US Presidential election and would proffer a huge stimulus bill, had diminished the safe-haven appeal of the American currency.

In point of fact, the US Dollar appeared to have regained its safe-haven bid on Tuesday after the US President Donald Trump had called off further negotiations regarding a comprehensive pandemic stimulus bill, though Trump had changed his tone later this week and a White House spokeswoman had been quoted saying on Wednesday that the US President would be backing a pandemic relief bill, should the bipartisan lawmakers reach an accord.

US Dollar sours as stimulus hopes rekindle

Since the American currency had been spiralling over a possible pandemic stimulus package lately, Friday’s downturn of the US Dollar was largely catalysed by a remark from the US House Speaker Nancy Pelosi who had been quoted saying earlier in the day that she would resume negotiations with the US Treasury’s Mnuchin late on the day.

Nonetheless, the talks between Mnuchin and Pelosi had broken off without a decipherable outcome, though a media headline released late on the day that said the Trump Administration had been working out a $1.8 trillion stimulus bill, had fuelled up the investors’ morale, however, analysts had cautioned that a comprehensive pandemic stimulus bill seemed highly unlikely before the November 3 US Presidential election.

Citing statistics, On Friday’s FX market closing bell, the US Dollar Index (DXY) measured against a basket of six major currencies fell by 0.54 per cent to 93.05, remarking its lowest level in three weeks, however, the US Dollar Index remained range-bound between 91.74 and 94.75 since late-July when an additional $1,200 per week in state unemployment benefits had expired.

Apart from that, the safe-haven Japanese Yen rose 0.39 per cent to 105.60, while the bloc’s common currency gained 0.57 per cent to wind down the day at $1.1825. Besides, possibilities of a Biden victory in the Nov.

3 US Presidential election had stepped up market optimisms, while the offshore yuan had been benefitted the most, rising to 6.6778 against its American counterpart and remarking its strongest level in one year and a half.

Concomitantly, the British Pound shot up 0.79 per cent to $1.3035, as investors seemed to be looking beyond a deluge of dismal data ahead of a key European Council summit next week. Meanwhile, referring to a deeply divided US Senate over the second-round of trillion dollar stimulus bill that could act as a lifeline for tens of millions of laid-off Americans, the North American head of FX strategy at CIBC Capital Markets in Toronto, Bipan Rai said on the day’s FX market round off, “It seems like, at least in the White House, there is more of a sense of urgency that it needs to be done.

However, the key question for us is whether or not the Senate Republicans are going to go with it … they don’t seem to be united. I think we’re more or less in a standstill until we get some more clarity on whether or not this stimulus package is going to go through”.