May 19, 2024

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FOREX-Dollar squeezed anew as stimulus hopes brighten mood

3 min read

By Tom Westbrook

SINGAPORE, Jan 20 (Reuters)The U.S. dollar came under gentle pressure in Asia on Wednesday and the euro found support as investors were buoyed by ebbing political turmoil in Italy, improving sentiment in Germany and a renewed focus on U.S. pandemic relief spending.

While the world will be watching Joe Biden’s inauguration as U.S. President at noon in Washington (1700 GMT), traders were more focused on his policies than the ceremony.

U.S. Treasury Secretary nominee Janet Yellen urged lawmakers to “act big” on stimulus spending at her confirmation hearing and said she believes in market-determined exchange rates, without expressing a view on the dollar’s direction.

The dollar index =USD backed away from a one-month high after her remarks and benchmark ten-year U.S. Treasury yields US10YT=RR, which have lately surged on borrowing expectations, slipped a little in their steadiest session of 2021 so far.

The dollar index was steady at 90.379 on Wednesday.

The euro EUR=EBS climbed as far as $1.2150, having extended gains made overnight, when it bounced off support around $1.2050 after the Italian government survived a confidence vote and a ZEW investor sentiment survey beat forecasts.

The risk-sensitive Australian and New Zealand dollars edged up to also hold modest gains. The Aussie AUD=D3 was last up 0.3% at $0.7719 and the kiwi NZD=D3 up 0.2% to $0.7130.

“We think Yellen is at best indifferent to a weakening dollar, and that in itself may be insufficient to turn the tide,” said OCBC Bank strategist Terence Wu, referring to a downtrend that has seen the dollar index lose about 12% since last March.

“Coupled with the market re-focusing on fiscal stimulus, the underlying risk-on, weak-dollar dynamic may re-assert dominance,” he said, leaving the bank bearish on the dollar as the effects of the recent gains in U.S. yields fade.

Positioning data shows investors overwhelmingly short dollars as they figure budget and current account deficits will weigh on the greenbacks. 0#NETUSDFX=

Analysts at Nomura said last year’s downtrend might resume again soon and were confident enough to suggest adding to bets the greenback will drop against the South Korean won KRW=, which it did slightly through the Asia session.

The euro was steady on the pound EURGBP= and held gains against the yen EURJPY=.

The safe-haven yen JPY=EBS had been sold broadly as risk sentiment improving mood on Tuesday, but caution in Tokyo, where equities slipped, supported it against the dollar. The yen last changed at 103.76 per dollar.

Sterling GBP= rose marginally to $1.3651, drawing support from a prediction by the Bank of England’s chief economist that Britain’s economy would begin to “recover at a rate of knots” in the second half of the year.

China’s yuan gained 0.2% to 6.4683 onshore CNY= despite the People’s Bank of China injecting 280 billion yuan into short-term funding markets to offset seasonal cash demands as well as a surge of money in to Hong Kong stocks. CNY/

There was no change to China’s benchmark lending rates, as expected.

Elsewhere in Asia, Malaysia’s central bank was due to the announce the outcome of its policy review at 3 p.m (0700 GMT). Nine of 15 economists polled by Reuters expect it will cut benchmark interest rates to historic lows.

Over in Canada, analysts saw a small chance of a ‘micro rate cut,” with the central bank moving its benchmark rate by less than 25 basis points, avoiding negative rates. A decision is due at 1500 GMT. The loonie CAD=D3 rose marginally to 1.2708 per dollar.

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Currency bid prices at 1:15PM in Singapore (0515 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Euro/Dollar

EUR=EBS

$1.2143

$1.2129

+0.12%

-0.61%

+1.2150

+1.2125

Dollar/Yen

JPY=D3

103.7400

103.9100

-0.17%

+0.43%

+103.9250

+103.7300

Euro/Yen

EURJPY=

125.97

126.00

-0.02%

-0.75%

+126.1700

+125.9700

Dollar/Swiss

CHF=EBS

0.8877

0.8885

-0.08%

+0.35%

+0.8887

+0.8875

Sterling/Dollar

GBP=D3

1.3655

1.3636

+0.12%

-0.07%

+1.3656

+1.3632

Dollar/Canadian

CAD=D3

1.2706

1.2732

-0.13%

-0.15%

+1.2735

+1.2708

Aussie/Dollar

AUD=D3

0.7726

0.7696

+0.38%

+0.43%

+0.7727

+0.7693

NZ Dollar/Dollar

NZD=D3

0.7134

0.7117

+0.24%

-0.65%

+0.7134

+0.7118

All spots FX=

Tokyo spots AFX=

Europe spots EFX=

Volatilities FXVOL=

Tokyo Forex market info from BOJ TKYFX

World FX rateshttps://tmsnrt.rs/2RBWI5E

(Reporting by Tom Westbrook; Editing by Lincoln Feast & Simon Cameron-Moore)

(([email protected]; +65 6318 4876;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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