Dollar plummets on U.S. stimulus hopes; bitcoin hits all-time peak
The dollar fell on Tuesday to its lowest level in more than 2-1/2 years, as investors’ appetite for risk increased on prospects of further fiscal stimulus from the United States as well as expectations of a solid global recovery.
News of a proposed COVID bill sank the dollar further, as did the resumption of talks between U.S. Treasury Secretary Steve Mnuchin and House of Representatives Speaker Nancy Pelosi on Tuesday about a stimulus package.
The proposed relief bill of $908 billion would fund measures through March 31, including $228 billion in additional paycheck protection funds for hotels, restaurants and other small businesses.
Mnuchin on Tuesday is to hold his first talks since the election with House of Representatives Speaker Nancy Pelosi, and a bipartisan group of senators has proposed a $900 billion bill that includes an extension of federal unemployment benefits.
Pelosi said on Tuesday Mnuchin would review both bipartisan Senate proposal as well her and Senator Charles Schumer’s COVID relief plan.
Bitcoin was also on a tear, hitting a record high just under $20,000. The virtual currency though was last down 3.8% at $18,961.
In afternoon trading, the dollar index fell 0.7% to 91.318, hitting 91.263, the lowest since late April 2018.
The euro hit a 2-1/2-year high vs the dollar at $1.2055 and last traded 1% higher at $1.2049.
“The technical argument in favor of additional euro gains in the short- to medium-term is fairly compelling,” said Scotiabank in a research note.
“November price action overall was bullish for the euro, the break out from the (second half) consolidation suggests upside potential towards $1.25-$1.26.”
Sterling climbed to a three-month peak versus the dollar after Times Radio said Brexit trade deal talks have entered the “tunnel” stage of negotiations. The “tunnel” is a term for an intense final stage of secretive, make-or-break negotiations.
The pound was last up 0.7% at $1.3410.
Nagging worries about rising coronavirus cases have not provided the dollar with much safe-haven support. Speculation is also growing that the Federal Reserve will act to support the economy through a tough winter before vaccinations become available. That should further weigh on the dollar.
*** The Fed meets to set policy on Dec. 15-16.***
Fed Chairman Jerome Powell and Treasury’s Mnuchin on Tuesday also urged Congress to provide more help for small businesses amid a surging coronavirus pandemic and concern that relief from a vaccine may not arrive in time to keep them from failing.
US dollar to weaken 6-7% against G10 and EM currencies: StanChart
Favor emerging market currencies as global economy set to recover: Analyst
Standard Chartered’s Eric Robertsen sees room for EM currency appreciation as carry and yield trades become an important part of the investment portfolio.
The Japanese yen has a ‘very interesting story,’ says currency strategist
Rodrigo Catril of the National Australia Bank discusses the outlook for safe haven currencies like the U.S. dollar and Japanese yen as global optimism grows on a vaccine-led coronavirus recovery.
10-year Treasury yield jumps above 0.9% to start December
U.S. Treasury yields climbed on Tuesday to start the month of December amid a big rally in risk assets.
The yield on the benchmark 10-year Treasury note jumped 7 basis points to 0.914%, while the yield on the 30-year Treasury bond rose by a similar magnitude to 1.651%. Yields move inversely to prices.
Investors monitored the Senate panel hearing with Treasury secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell to provide updates on CARES Act programs.
Reference: CNBC, Reuters
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