US Dollar dwindles to two-year lows as US stimulus optimism buoys up risk-appetite

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US Dollar dwindles to two-year lows as US stimulus optimism buoys up risk-appetite

On Tuesday, an apparently death-crossed US Dollar fell to a more than two-year low against the bloc’s common currency euro, while riskier assets such as Canadian Dollar alongside Australian Dollar, a closely monitored proxy to global economic health, closed sharply higher against the greenback as investors’ optimism over an additional stimulus package had buoyed up risk-appetite.

In point of fact, Tuesday’s tottering of American currency was almost entirely hinged over hopes of an inflated stimulus payments to American nationals, while US House of Representative’s approval to triple a one-time pay-check of $600 to $2,000 in pandemic relief aid, led to a clattering sell-off wave for the US Dollar.

Nonetheless, it is highly unlikely that the US Senate would approve the bill, while the US Senate Republican leader Mitch McConnel had whacked out the possibilities of an extension of the one-off relief bill to individuals.

US Dollar plunges to more than 2-year lows

Citing statistics, in the day’s FX market winddown, American Dollar Index (DXY) measured against a basket of six major currencies on an average was slumped by 0.35 per cent to 89.92, harbouring just above a 2-1/2-year low of 89.72 reached on December 17, while investors were heavily priced in a further pommelling of the US Dollar Index.

Aside from that, the Australian Dollar, which had reached its 12-year closing peak of $0.7639 on December 17, gained 0.34 per cent to $0.7608, while the greenback indented 0.40 per cent against the Canadian Dollar to C$1.2797.

In tandem, the bloc’s common currency euro gained as much as 0.40 per cent to $1.2265 after hitting a session high of $1.2274, its highest since April 2018, while British Pound soared 0.28 per cent against its American peer to $1.3496, snapping a two-session long losing streak.

Meanwhile, addressing a hike in risk appetite over another stimulus bill alongside a near-zero benchmark borrowing cost of US Federal Reserve, FX analysts at Scotiabank said in a client note, “The possibility of another U.S.

stimulus package has lifted the market’s spirits. Still, market optimism may be somewhat unwarranted as the legislation faces little chance of passing in the Senate as Republicans attempt to rein in spending - but rejecting increased payments amid pressure from Trump could risk their showing in the Jan. 5 Georgia Senate runoffs.