On Tuesday, the American currency had clocked a broad-based gain in thin trading, as concerns were mounting over a new pandemic-pathogen strain which had been prompted British authorities to shut down a majority of their counties ahead of the holiday season, while a raft of renewed travel restrictions inclined on a number of EU-member countries had bolstered a safe-haven bid for the US Dollar.
Aside from that, a $2.3 trillion Government stimulus bill containing about $892 billion in pandemic relief measures passed in the US Congress late on Tuesday, had largely undermined analysts’ expectation, eventually dampening appetite for riskier assets.
US Dollar claws back as global FX market see-saws
Apart from a US pandemic stimulus bill that largely deflated investors’ optimisms, Govt. data released earlier in the day had also been weaker-than-anticipated, as the US existing home sales fell more than expected last month and the US Consumer Confidence took a hit as well, reinforcing a blistering rally of the US Dollar.
In tandem, as risk-appetites took a tattering header on Tuesday, a slew of US stocks were jolted but Nasdaq and the Treasury yield gained, while currencies linked to higher risk appetite likes of euro and sterling had witnessed a broad-based decline.
Besides, the Australian Dollar, a closely monitored proxy for the global economic health, fell 0.8 per cent against US Dollar, while New Zealand Dollar had shed 0.7 per cent against the greenback. Citing statistics, in the day’s FX market round off, the US Dollar Index (DXY) measured against a basket of six major currencies gained as much as 0.6 per cent to 90.67, while the American currency added 0.4 per cent against the safe-haven Japanese Yen to 103.70 yen per dollar.
Concomitantly, the bloc’s common-currency euro plunged 0.7 per cent against its American peer to $1.2156, while the British currency slid 0.9 per cent to $1.3350. Meanwhile, citing that a recent leg of blowout rally of the US Dollar would more likely to be short-lived, a Chief market strategist at Bannockburn Global Forex in New York, Marc Chandler said, “Momentum, market positioning, and the skew in the options market all warn of the risk of an upside correction in the dollar, even if the precise timing is difficult to predict.
At the same time, the pandemic in Europe, lockdowns, and a seemingly less aggressive approach to the vaccines, including orders suggested a bleak Q1 in 2021. ”