Dollar climbs as coronavirus variant negates stimulus optimism
The dollar rose on Tuesday in thin trading, as concerns about a coronavirus variant raging in Britain that has caused lockdowns and travel restrictions have dampened optimism about a U.S. stimulus bill that Congress passed overnight.
Risk appetite took a hit, as U.S. stocks fell except for the Nasdaq, and U.S. Treasuries rallied.
Tuesday’s data was weaker than expected, with U.S. existing home sales falling more than expected in November and the consumer confidence index lower than forecast. The weak U.S reports reinforced the dollar’s rally.
Meanwhile, an $892 billion COVID-19 aid package passed by Congress is awaiting President Donald Trump’s approval to become law. Some analysts though said the relief package has already been priced in the market and therefore the impact has been muted.
Investors overall remained concerned about the new coronavirus variant even as medical experts sought to ease concerns about it.
In afternoon trading, the dollar index rose 0.6% to 90.675, as the euro fell 0.7% to $1.2156 .
The dollar rose 0.4% versus the yen to 103.70 yen.
The market has been positioned for a weaker dollar. It is pricing in a pandemic recovery that lifts commodity prices and benefits exporters and their currencies at the expense of the dollar.
“I still think the dollar is going to remain under significant pressure for the first half of the year. We have U.S. equities that are overvalued and overpriced,” said Ronald Simpson, managing director, global currency analysis at Action Economics in Florida.
“Once COVID calms down there will be more opportunity in emerging markets,” he added.
Sterling also slid against the dollar, down 0.9% at $1.3350. The pound slipped versus the euro as well, down 0.1% at 91.03 pence per euro.
There is a post-Brexit trade deal on the table between Britain and the European Union, and while both sides want to wrap up negotiations before Christmas Eve, the talks remain strained, the Sun newspaper reported on Tuesday, citing a senior British source.
Reference: CNBC
Thai
Eng