FX Rate News

The dollar held steady on Thursday as investors were cautious over expectations about a COVID-19 vaccine that is unlikely to avert a grim winter in the United States and Europe as the pandemic’s latest wave intensifies.

The dollar index was up 0.01% in the morning in New York, after having rebounded a little in London from lows during Asia trading.

The latest U.S. weekly jobless claims report did not budge the dollar when it came out on Thursday morning. The report showed the pace of decline in claims had slowed to 709,000 compared with 757,000 the prior week and forecasts for 735,000 claims.

U.S. stocks fell, with the S&P 500 dropping about 0.5% in early New York trading.

U.S. Treasury yields slumped, in line with Europe, weighed down by the rise in coronavirus cases around the world and data showing inflation going nowhere in the United States.

In midmorning trading, U.S. benchmark 10-year yields were down at 0.917% Euro bond yields fell slightly earlier in the day. Larger moves were being held in check as investors awaited speeches at midday in New York trading from Federal Reserve Chair Jerome Powell, European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey at a virtual central banking forum.

“There is a nervous calm in the capital markets today,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.

While prices are not charting a new direction, nervousness stems from the outlook for the coronavirus pandemic, central banks’ future interest rate policies and the transition from last week’s U.S.
presidential elections, Chandler said.

The questions come amid possibly shifting views about the U.S. dollar’s role as a safe haven or as a ticket to gains from a strengthening global economy, he said. The euro bumped higher by 0.14% to $1.1796.

The euro is trying to find its feet “after the vaccine-related storm of activity at the start of the week, and after the U.S. election news,” said Jane Foley, head of FX strategy at Rabobank. The euro, Chandler noted, has been trading between $1.16 and $1.20 since late July.

“Being in the middle of a range makes nobody happy. Bulls nor bears can be happy,” he said.
Europe is grappling with surging infections and new COVID-19 restrictions, with Germany’s economic advisers trimming next year’s growth outlook. In the United States, cases continue to hit record levels.

The dollar’s strength in the past week has for now put the brakes on a long drop for the greenback, which had shed about 10% against a basket of currencies between March and the announcement of progress on Pfizer Inc’s COVID-19 vaccine on Monday.

Earlier in Asia, the New Zealand dollar made a fresh 20-month high versus the U.S. dollar as traders became less convinced that negative rates are a sure thing for New Zealand.

Along with the virus, Republican U.S. President Donald Trump’s refusal to concede defeat to Democrat Joe Biden in last week’s election is also beginning to jangle investors’ nerves.

The dollar gained 0.6% against the Canadian dollar $1.314 Sterling licked its wounds as trade talks between Britain and the European Union seemed set to drag on past yet another deadline, raising the prospect that no trade deal may be reached before Brexit transition arrangements end on Dec. 31.

The British currency last traded 0.5% lower to the dollar at $1.3149.

Bitcoin briefly climbed above the $16,000 mark on Thursday, hitting a level not seen since January 2018.

The cryptocurrency’s price rose as high as $16,019 just after 5 a.m. ET, according to data from industry site CoinDesk. It was last trading more than 1% higher at $15,773.

The reason for the move wasn’t immediately clear, but it comes as a number of companies appear to be warming to crypto.

Last month, fintech giant PayPal announced it would add new features letting users trade bitcoin, ether, bitcoin cash and litecoin. By early 2021, the company also plans to let customers use crypto to shop with its network of 26 million retailers.

The yen scraped back some losses against the U.S. dollar on Tuesday, after the safe currency took a drubbing on news of the development of a coronavirus vaccine which raised optimism of a global economic recovery.

U.S. drugmaker Pfizer Inc and German partner BioNTech SE said a large-scale clinical trial showed their vaccine was more than 90% effective in preventing Covid-19.

The yen edged higher to 105.07 against the dollar, after suffering its biggest loss overnight since March. It fetched 76.42 against the Australian dollar, having lost more than 2% overnight.

“What’s important about the overnight movement is that it overturned the current trend of the U.S. dollar falling, instead of the yen, when the market turns risk-on,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

“The yuan and euro have been rising against the dollar as equities jumped on Joe Biden’s election win … But the overnight movement flipped things back to the way it is when markets usually turn risk-on: U.S. Treasury yields rise and the yen depreciates more than the dollar.”

The vaccine news comes as the global tally of Covid-19 infections reached 50.68 million on Monday, stoking worries of more lockdown measures across the globe.

Some analysts said markets over-reacted to the news because questions about the vaccine remain, such as how effective the vaccine is by ethnicity or age and how long immunity may last.

“Perhaps the market did over-react to the vaccine, given there’s still some way to go prove that it’s safe,” said Westpac currency analyst Imre Speizer.

“What they’ve shown is that it’s reasonably effective, safety is another stage. Once the market looked into the finer print of what these results were, maybe they backed off the trade a bit.”

The Australian dollar steadied at $0.7275 against its U.S. counterpart after touching a seven-week high on Monday.

The euro stood little changed at 1.1819, having fallen more than 0.4% overnight.

The prospects of a Biden presidency has boosted risk sentiment as many believe it could boost international trade relations and maintain an easy monetary policy.

Still, incumbent Donald Trump has made no sign of conceding and his campaign is planning a series of rallies to build support for legal fights challenging the election results.

U.S. Senate Majority Leader Mitch McConnell on Monday said President Donald Trump was completely within his rights to look into “irregularities” from the election.

Trump also said he had “terminated” Defense Secretary Mark Esper, signaling he may use his final months in office after defeat at the polls to settle scores within his administration.

Against a basket of currencies, the dollar held steady at 92.75, slightly above Monday’s 10-week trough of 92.12.

The dollar sank to its lowest level in over two months against a basket of peer currencies on Friday, as vote counting for the contentious U.S. election dragged on and investors predicted more losses for the currency.

Investors are betting that Democrat Joe Biden will become the next president but Republicans will retain control of the Senate, which will make it difficult for the Democrats to pass the larger fiscal spending package they have been pushing.

Biden maintains an edge over President Donald Trump, but a few important states are still counting votes and Trump is mounting legal challenges to vote counts, so there is still a high degree of uncertainty.

The dollar index fell against a basket of six major currencies to 92.274, hitting its lowest level since September 2.

For the week, the dollar index was down 1.6%, on course for its biggest drop in almost four months.

A large decline in long-term Treasury yields due to expectations for less fiscal spending, combined with a rally in equities and other riskier assets, has placed the dollar under consistent selling pressure that is likely to continue.

“So far investors have been prepared to overlook the threat of a contested election, presumably seeing Donald Trump’s legal initiatives as ‘frivolous’ and these benign conditions have generated a broad-based dollar decline,” said strategists at ING. “The fact that dollar/yen (which never moves) is trading at 103.50, tells us that there is a broader dollar move afoot than a mere risk rally.”

The dollar fell further against the Japanese yen, trading at 103.23 yen on Friday, close to an eight-month low.

Japanese Prime Minister Yoshihide Suga has vowed to work closely with overseas authorities to keep currency moves stable, because a strong yen is widely viewed as a threat to Japan’s economy.

Against a buoyant euro, the dollar traded at $1.1874 after falling 0.87% in the previous session.

The single currency has risen sharply this week on the dollar’s weakness, but has also benefited from news of the European Union inching closer to a budget deal.

The British pound traded at $1.3128, 0.2% lower on the day after a hefty 1.23% gain on Thursday.

Voting tallies from several U.S. states continued to trickle in during Asian trading hours, but currencies showed little reaction because the declaration of an outright winner could take several more days or even weeks, some traders said.

Investors were also awaiting the release of U.S. non-farm payrolls later on Friday, forecast to show a slight slowdown in job creation.

Worries about the U.S. economy are growing, which is a reason to expect declines in the dollar to continue into next year, some analysts say. The rise in new coronavirus cases to record levels in several states could also curb economic activity.

ING also added that the dollar sell-off may have a little more mileage today if Biden formally secures 270 electoral college votes or if a softer-than-expected October payrolls report suggests that the Fed will have to throw more liquidity at the market.

The onshore yuan fell to 6.6386 per dollar but still remained close to its more than two-year high reached on Thursday.

Many investors expect a Biden administration will slightly scale back Trump’s trade war with China, which should benefit the yuan.

Elsewhere, the Australian dollar fell against the greenback after the country’s central bank said it is prepared to expand bond purchases if needed to support the economy.

The dollar’s losses deepened on Thursday, setting it on course for its biggest three-day losing streak in more than three months as traders braced for the outcome of a U.S. central bank policy meeting that might hint at more stimulus.

Traders also unwound some of their safe-haven demand for the greenback as Democrat Joe Biden moved closer to victory in the U.S. presidential race with election officials tallying votes in the handful of states that will determine the outcome.

But his party is falling short of expectations in Congressional elections, with the Senate looking increasingly likely to stay in Republican hands, making it hard to implement a big stimulus package.

Financial markets were braced for days or even weeks of uncertainty as incumbent President Donald Trump has opened a multi-pronged attack on vote counts in several states by pursuing lawsuits and a recount which is also widely seen as dollar negative.

“The Fed today is a bit of a sideshow but there is a chance it may strengthen forward guidance around potential quantitative easing and that would be dollar negative as you may also have less stimulus,” said Justin Onuekwusi, portfolio manager at LGIM.

Against a basket of its rivals, the dollar fell 0.5% to 92.93, its lowest level in more than a week. On a cumulative basis, the greenback has weakened 1.2%, its biggest three-day fall since late July, according to Refinitiv data.

The dollar’s weakness was also compounded by a broad-based decline in U.S. Treasury yields with spreads between benchmark 10- and 2-year maturity debt tightening to its narrowest levels in more than three weeks.

With the final result of U.S. elections still uncertain, the Fed is expected to stick closely to its last statement and repeat its pledge to do whatever it can to help the economy through the coronavirus-triggered recession. The decision is due at 1900 GMT.

“The dollar will probably be caught between a haven bid on the uncertainty of the disputed election and a lack of interest in shorting the currency on the prospects of a potential Biden win,” said John Velis, an FX and macro strategist at BNY Mellon.

Some of the biggest gains were seen in currencies which had borne the brunt of Trump’s protectionist policies in recent years, with the Chinese yuan briefly rising to a more than two-year high versus the greenback.

The euro hopped above the $1.18 mark, up 0.6% from the previous session as some investors bet on a Biden victory.

“The euro was flying around in the last couple of days, to and fro, but in the end it does seem like the euro tends to be stronger under a Biden scenario,” said John Vail, chief global strategist at Nikko Asset Management.

The British pound broke above $1.30 after the central bank ramped up its bond purchase plan.

Elsewhere, the Norwegian crown gained more than 1% versus the dollar after the central bank said it would maintain its accommodating policy until the economy shows clear signs of revival from the coronavirus pandemic.

Broader currency market volatility gauges declined with a widely-watched index falling to more than three-month lows .

The U.S. dollar jumped and risk-sensitive currencies weakened on Wednesday as early results in the U.S. presidential election showed a very tight race, prompting a wind-back of bets on a victory by Democratic challenger Joe Biden.

President Donald Trump, who has so far trailed in polls, has maintained a slim lead in key battleground state of Florida, with the Chinese yuan and Mexican peso hit hardest by the specter of four more years of his aggressive trade policy.

“I think the odds of a clean sweep are diminishing, almost by the minute. That reduces the possibility, or the likelihood at least of a large stimulus program being agreed to in the first days of a Biden administration,” said Matt Sherwood, head of investment strategy at Perpetual in Sydney.

The Mexican peso fell almost 4% at one point and last traded at 20.905 per dollar, down almost 3% while the offshore Chinese yuan fell 0.8% to 6.7362 to the dollar, hitting one-month low at one point.

Among major currencies, the euro fell 1% to a low not seen since late July and last stood at $1.1624, down 0.82% on day.

The Australian dollar lost 0.6% to $0.7128 while the British pound dropped 0.6% to $1.2983. The Canadian dollar fell 0.65% to C$1.3218 per U.S. unit. All of them sank more than one percent at one point.

The Japanese yen also gave up 0.65% to 105.195 per dollar.

Trump was narrowly leading Biden in Florida, while other competitive swing states that will help decide the election outcome, such as Georgia and North Carolina, remained up in the air.

That undercut expectations in markets this week that Biden will likely win the presidency and adopt a large stimulus to support the economy.

“If Biden won Florida, he was almost certain to win the entire race but uncertainties seem high and we are seeing a correction in risk-on trades,” said Yujiro Goto, head of FX strategy at Nomura Securities.

The dollar index measuring the greenback against a basket of currencies gained 0.7% to 94.202.

Investors were increasingly braced for the possibility that the election results may not become clear on Wednesday, with markets hedging against the risk of a contested election or a potentially drawn out process as mail in ballots were counted.

Analysts at Morgan Stanley have said if the results are too close to call by 12pm EST on Wednesday (0500 GMT on Thursday), it will likely be too close to call for several days beyond that.

“A contested election probably takes all of the SPX, Bond yields and the USD (at least versus majors) down meaningfully,” said Alan Ruskin, chief international strategist at Deutsche Bank in New York.