FX Rate News

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.

The dollar paused its climb on Friday, while the euro wallowed near its four-week low against the greenback after the European Central Bank signaled further monetary easing by the end of the year.

Overnight, the euro’s decline in addition to U.S. data helped lift the greenback to a near four-week high against a basket of currencies.

The ECB kept interest rates steady on Thursday but committed to contain the growing fallout from a second wave of coronavirus infections, saying it would hone its response by its December meeting, as widely expected by the market.

“We agreed, all of us, that it was necessary to take action and therefore to recalibrate our instruments at our next Governing Council meeting,” ECB President Christine Lagarde told a news conference.

Daisuke Karakama, chief market economist at Mizuho Bank, said that a build-up of expectations for ECB’s monetary easing may cause risks such as a dollar-buying spree or the euro to fall further.

“It’d be fine if the ECB can exceed market expectation… but now that they’ve made an announcement in advance, there’s a risk if (the December meeting) turns out to be underwhelming,” Karakama said.

The euro slightly firmed to $1.1679 in Asia, after hitting a four-week low of $1.1650 in U.S. trade overnight.

Against the yen, the common currency slightly eased to 121.79 yen.

Data on Thursday showed the U.S. economy grew at a record pace for the third quarter and an improving trend in jobless claims, while scars from the coronavirus recession still lingered.

U.S. gross domestic product rebounded at a 33.1% annualized rate last quarter, according to an advance estimate on Thursday, the fastest pace since the government started keeping records in 1947.

Separately, a report showed 751,000 people in the United States filed for state unemployment benefits in the week ended Oct. 24, compared with 791,000 the previous period.

The dollar index was flat at 93.889 but sat within reach of Thursday’s four-week high at 93.916, poised to mark the biggest weekly gains since the end of September.

Still, uncertainty surrounding Tuesday’s U.S. presidential election and coronavirus fears continue to loom over market.

“As dollars were bought mostly against the euro for the past two days, there’s a move to sell the greenback back ahead of the election,” said Makoto Noji, chief FX strategist at SMBC Nikko.

Global daily coronavirus cases rose by over 500,000 for the first time, with France and Germany going back into coronavirus lockdowns next week.

In the United States, a single-day record was set on Thursday with over 91,000 new coronavirus cases, as hospitalizations hit new highs in many states, according to a Reuters tally.

Data due later on Friday include euro zone’s third-quarter gross domestic product and October inflation, while the U.S. awaits September personal consumption and expenditures as well as the Chicago PMI.

The Chinese yuan firmed against the greenback as China’s leaders endorsed a new five-year plan to drive sustained economic growth, which markets believe will require a stronger currency.

The greenback edged lower against the Japanese yen at 104.30 yen, after rallying overnight from a five-week trough as it benefited from a rebound in U.S. treasury yields and broad dollar buying.

Sterling changed hands at $1.2906, undermined by a lack of Brexit-related headlines as London and the European Union have just two months to reach a post-Brexit trade agreement.

Among antipodean currencies, the Aussie last sat at $0.7032, a fraction above a three-month low of $0.7002 marked overnight.

Meanwhile, the kiwi held steady, last fetching 0.6619 per dollar.

The U.S. dollar slipped on Tuesday as investors took some profits after the previous session’s gains that also saw a sell-off in equities, while worries about a second coronavirus wave and uncertainty ahead of the U.S. election persisted.

The greenback fell against the currencies that benefit mostly from higher risk appetite such as the euro, sterling, and commodity-linked currencies rose.

Monday saw the steepest stock market sell-off in a month and a bond rally, but foreign exchange market activity has remained relatively muted, with price moves on Tuesday limited. “The uncertainty in the economic outlook has not changed one bit,” said Edward Moya, senior market analyst, at OANDA in New York, but noted that some positive stories on the U.S. earnings front.

“Markets are becoming more convinced a blue wave is happening,” Moya said, referring to a victory of the Democratic Party in the Senate, House of Representatives, and the White House in next Tuesday’s election.

“The prospects of a Biden administration is probably more positive for the fight against COVID,” he added. Polls give Democrat Joe Biden a solid lead but the contest is much tighter in battleground states that could decide the outcome.

That said, analysts warned investors were clearly cautious after the United States, Russia and France all hit new daily records for COVID-19 infections. They said prices were not moving much because of a reluctance to build positions before the U.S. presidential election on Nov. 3.

After initially falling, the euro was up 0.2% at $1.1826 in late morning trading.

The dollar index, which measures the greenback against a basket of major currencies, weakened 0.2% to 92.92.

The greenback fell 0.3% versus the yen to 104.53 yen, and was little changed against 0.9074.

“Many sources of uncertainty are still preventing clearer trends from emerging,” UniCredit analysts said in a research note. “The impasse on both U.S. budget talks and Brexit negotiations, as well as the implications of rising COVID-19 infections on 4Q20 GDP growth, play in favor of more euro-dollar and sterling-dollar stabilization for now,” they said, pointing to levels of “just above $1.18 and $1.30, respectively.”

The usually risk-sensitive Australian and New Zealand dollars gained.

The yuan weakened after Reuters reported that China’s central bank had neutralised the counter-cyclical factor in its daily yuan midpoint fixing in a move to let the fixing more closely reflect actual market moves.
The move is typically positive for the dollar, said Stephen Innes, chief market strategist, at online brokerage Axi.

“Such a move means dollar/yuan should generally fix higher. The removal of the element would imply greater FX flexibility,” he added. The dollar was last flat 0.1% at 6.7039 yuan.

The dollar gained on Monday, as surging coronavirus cases in Europe and the United States and a lack of progress on a U.S. stimulus package made traders cautious.

U.S. House Speaker Nancy Pelosi said on Sunday that she expected a White House response on Monday to the latest stimulus plan, but there is little evidence a deal is close.

The United States has recorded its highest number of new COVID-19 cases for two consecutive days. So has France. Spain announced a new state of emergency and Italy has ordered restaurants and bars to shut by 6 p.m.

Media reports that the Oxford/AstraZeneca vaccine has proved successful in elderly people and that staff at a major British hospital were told to prepare for a vaccine as early as next month failed to bolster sentiment.

Stephen Innes, chief global market strategist at broker Axi, said hopes for a vaccine prevented markets crashing on Monday.

“Fortunately, there are several vaccines in the pipeline, or we could have been looking at a pretty significant market reset this morning with Covid-19 flash points flaring up in virtually every corner of the globe this weekend,” he said.

An index tracking the U.S. dollar against a basket of currencies was last up 0.2% at 92.95. Euro/dollar – the most traded currency pair and part of the index – fell 0.3% at 1.1831.

The dollar also rose 0.1% against the Japanese yen at 104.87 .

The biggest losers among major currencies were the Norwegian crown and the Australian dollar, which last week enjoyed hefty returns as traders took on more risk.

The Aussie dollar was last down 0.3% at 0.7118. The Nokkie was falling 0.9% at 9.3015 against the dollar and by 0.7% at 11.0050 versus the euro, having hit earlier a three-week low of 11.0190.

Norway is also due to announce stricter measures this week to limit the spread of the coronavirus following increases in the number of cases.

Traders will be watching for the German Ifo business survey at 0800 GMT. Current conditions are expected to have improved, according to economists polled by Reuters.

Elsewhere, the British pound lost ground in early trading, falling 0.3% to $1.2995 but was stable versus the euro at 91 pence.

The Chinese yuan was down 0.4% against the U.S. dollar at 6.6907 in the offshore market as the Chinese government began discussions on its next five-year plan.

The dollar inched higher at the end of a tough week on Friday, having shed almost a cent against the euro and suffered its largest weekly drop against the yen in a month, as a measured U.S. presidential debate left investors in a cautious mood.

President Donald Trump adopted a more restrained tone than in the first debate, though exchanges again focused around the handling of the Covid-19 pandemic and personal slights.

The dollar ground about 0.1% higher against a basket of currencies in the Asia session, just clear of Wednesday’s seven-week low, but still leaving it down about 0.7% for the week and in the bottom half of a months-long range.

“The market reaction is rather muted in Asian trading hours but has slightly tilted towards a more conservative sentiment as seen in the strengthened dollar index,” said Gary Ng, Asia-Pacific economist at Natixis in Hong Kong.

The safe-haven yen also rose about 0.2% to 104.70 per dollar, paring some losses made on Thursday after U.S. House Speaker Nancy Pelosi said there was progress in stimulus talks.

The yen is up about 0.7% for the week, its sharpest weekly rise since mid September, as investors who expect turbulent trade around the Nov. 3 election head for some shelter.

The euro slipped 0.1% to $1.1800 and the Australian dollar also handed back a small early-morning gain during the Trump-Biden debate. Both currencies remain more than half a percent ahead on the dollar over the week.

“People are just closing out longs ahead of the election just in case Biden isn’t (elected),” said Chris Weston, head of research at broker Pepperstone in Melbourne.

“We’re coming into that eye of the storm now where it takes a bit of a brave soul to put on new positions ahead of the election.”

Persistent hopes that Congress might pass a stimulus package before the election and confidence that spending follows anyway, no matter who gets elected, has driven a selloff in the bond market in anticipation of inflation and government borrowing.

The dollar has been sold because the prospect of stimulus has supported investors’ mood. A Biden victory, which polls predict, is seen as more likely to drive further dollar weakness as he is expected to spend more on coronavirus aid than Trump.

However betting markets showed a small movement in Trump’s favor in the immediate aftermath of the debate, bookmaker Ladbrokes said on Twitter on Friday – which helped the dollar to firm.

Elsewhere the New Zealand dollar edged down 0.1% after softer-than-expected inflation data, though it has still gained almost 1% for the week.

British and European Purchasing Managers’ Index figures are due later on Friday and could move markets if they show that a recent resurgence in coronavirus cases and the reimposition of some curbs on movement are starting to hurt economically.

Sterling slipped on Thursday on uncertainty over Brexit outlook, but it is up 1.2% this week and is clinging on above $1.30 thanks to hopes that Britain and the European Union can eventually reach some sort of trade deal.

The Chinese yuan also held its ground on the greenback after an official at China’s foreign exchange regulator said it has been more stable than expected, suggesting authorities are not too worried about its recent rise.

The yuan has gained about 7.5% since the end of May as China has led the global coronavirus recovery. It last sat at 6.6828 per dollar in onshore trade, about half a percent shy of a 27-month peak it hit on Wednesday.

“The 6.6300 levels in the USD/CNH reached on Wednesday may be a near-term bottom,” said OCBC Bank strategist Terence Wu.

“Nevertheless, this bounce should not impinge on the RMB trend. This may be an opportunity to re-enter USD/CNH shorts at 6.6800/7000 levels.”