30 Dec, 2020 - Dollar falls to more than two-year lows as stimulus hopes stay high
The euro, Aussie and New Zealand dollars all posted more than two-year highs against the struggling greenback on Wednesday as investors bet on more U.S. fiscal support and positioned for year-end in light trading volume.
Investors are betting that an improving economic outlook as COVID-19 vaccines are rolled out and unprecedented fiscal and monetary stimulus will boost global growth and asset prices in 2021.
U.S. economic growth is expected to drag behind peers, however, with the U.S. currency also suffering from rising fiscal and current account deficits as the government increases spending to tackle coronavirus-related business shutdowns.
The dollar fell 0.4% against a basket of currencies to 89.68 after earlier dropping to 89.56, the lowest since April 2018. It is down more than 7% this year.
Trading volumes are thin with many investors out between the Christmas and New Year holidays. The euro reached $1.2310, before falling back to $1.2279, up 0.30% on the day.
It was the highest level for all three currencies against the U.S. dollar since April 2018.
The dollar also slipped 0.5% to 103.05 yen. It is holding just above a nine-month low of 102.86 yen reached on Dec. 17.
U.S. President-elect Joe Biden is expected to push for more measures to support the U.S. economy after he is inaugurated next month.
Sterling also jumped before lawmakers on Wednesday voted on the Brexit deal Prime Minister Boris Johnson clinched last week.
The agreement avoids a chaotic no-deal exit, but does not cover services, which make up 80% of the British economy.
The pound gained 0.7% to $1.3601. It is holding below the $1.3625 level reached earlier this month, the highest since May 2018.
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The yuan could appreciate a further 3% to 5% in 2021, economist says
Tommy Xie, OCBC Bank’s head of greater China research, gives his outlook for the Chinese yuan ahead.
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31 Dec,2020 - Dollar sucked into downward spiral by U.S. twin deficits
The dollar was ending 2020 in a downward spiral on Thursday with investors wagering a global economic recovery will suck money into riskier assets even as the yawning U.S. twin deficits argue for an ever cheaper currency.
The euro steamed ahead to $1.2281, having hit its highest since April 2018 with a gain of almost 10% for the year. The next stops for the bull train are $1.2413 and $1.2476, on the way to the 2018 peak at $1.2555.
The dollar also dropped to 103.07 yen, but stopped just short of the December low at 102.86. Trade was thin in Asia with Japan and South Korea on holiday.
Sterling jumped as lawmakers approved a post-Brexit trade deal with the European Union. The pound stretched as far as $1.3647, levels not seen since May 2018.
Against a basket of currencies the dollar had sunk to 89.62, having touched it lowest since April 2018. That left it down 7.2% on the year, and no less than 13% on the 102.99 peak hit during the market mayhem of mid-March.
The next target is 89.277 and then 88.251, which was the absolute low in 2018.
The prospect of a brighter 2021 has lessened the need for the safe-haven dollar, while burnishing the attraction of riskier assets especially in emerging markets.
Reference: CNBC, Reuters
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