FX Rate News

The dollar halted its slide on Friday after U.S. Treasury Secretary Steven Mnuchin called an end to some of the Federal Reserve’s pandemic lending, derailing a risk rally and surprising investors who had counted on central bank support.

The announcement damped a previously positive mood after reports that U.S.

Senate Republican and Democrat leaders had agreed to resume negotiations on another coronavirus stimulus package.

While Mnuchin’s move was aimed at re-appropriating some $455 billion allocated to Treasury under the CARES Act in the spring for other spending, some investors were concerned about ending programs that they think have played a vital role in reassuring markets.

The Fed also said it “would prefer that the full suite of emergency facilities established during the pandemic continue to serve their important role as a backstop,” a rare open confrontation with the government.

“Investors have banked on the MLF (Municipal Liquidity Facility) being a reliable, emergency lender to our (municipal bond) market’s core borrowers. It has taken the idea of a payment default or catastrophic budget problem off the table,” said Matt Fabian, partner at Municipal Market Analytics at Westport, Connecticut, in the United States.

“Without the MLF, the market won’t collapse, but it will lack some resilience if its tested by a selloff or more pronounced credit fears.”

Also souring risk appetite, California ordered a curfew placed on all indoor social gatherings and non-essential activities outside the home across most of the state in a major escalation of measures to curb an alarming surge in coronavirus infections.

For over a week, the dollar has lost ground against riskier currencies due to coronavirus vaccine breakthroughs and hopes of reduced political uncertainty after the U.S. election.

The dollar index stood at 92.306, off Thursday’s low of 92.236, though it is still down 0.3% on the week.

The euro fetched $1.1874, flat on the day but not far from this week’s high of $1.18935 touched on Tuesday and up 0.3% on week.

The yen stood at 103.80 per dollar, retaining its weekly gain of 0.8%.

The reaction in currency markets, however, has been limited compared with the U.S. stocks and bond markets.

“There is a feeling that, at the end of the day, financial markets will remain solid and detached from the troubles in the real economy. A correction in stock prices was natural given their recent gains,” said Tatsuya Chiba, manager of forex at Mitsubishi UFJ Trust Bank.

“For now we have to see whether stocks markets’ retreat will prove to be a temporary one,” he said.

The British pound was on the defensive after the Times newspaper reported that European leaders will urge the European Commission to publish no-deal Brexit plans as the year-end deadline approaches.

The currency changed hands at $1.3258. Against the euro, it stood at 0.8955 pound per euro, wiping its gains made over the past two days.

Outside the dollar index basket currencies, the Australian dollar, which is sensitive to economic sentiment, stood little changed at $0.7284, having erased most of its gains this week.

The offshore Chinese yuan was flat at 6.5716 to the dollar after hitting a 2 1/2-year high of 6.5318 on Wednesday.

The Turkish lira held firm following a 2.3% jump on Thursday after the central bank, under new governor Naci Agbal, delivered a big rate hike as expected and pledged to remain tough on inflation.

The lira changed hands at 7.5450 to the dollar, near its highest level in almost two months. The lira is the best performing currency so far this month.

Elsewhere, bitcoin retained its bullish tone, trading at $17,971, near a three-year high touched on Wednesday.

The dollar slipped for a fifth straight session on Wednesday, sliding to a more than one-week low, as positive vaccine news offset the surge in coronavirus cases and tighter economic restrictions across the United States and Europe.

The market showed a little more appetite for risk-taking, with gains in currencies that rise in times of improving sentiment such as sterling, the New Zealand dollar, and Norwegian crown.

Pfizer announced that the final results from the late-stage trial of its COVID-19 vaccine showed it was 95% effective, giving relief to a pandemic-weary market . That followed news that Moderna Inc released preliminary data for its vaccine, showing 94.5% effectiveness.

That said, the number of reported global daily deaths from the coronavirus stood at 10,816 on Tuesday, according to a Reuters tally, the highest single-day death count. The United States, the worst-affected country worldwide, has reported about 11.38 million infections and 248,574 deaths since the pandemic started.

“A spike in COVID cases is generally good for the dollar and other safe-haven currencies like the yen and Swiss franc, but the positive vaccine news roughly counters that,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.

The dollar overall is expected to weaken as global economies improve once the vaccine gets widely distributed and as the Federal Reserve stands ready to provide more easing that should further erode the value of the greenback.

Fed Chair Jerome Powell said on Tuesday there was “a long way to go” to economic recovery and a retail sales report released by the U.S. Commerce Department showed spending decelerating.

In mid-morning trading, the dollar index slipped 0.1% to 92.298, after dropping as low as 92.207, its lowest level since Nov. 9.

Bitcoin, sometimes regarded as a safe haven, or at least a hedge against inflation, rose to more than $18,000 for the first time in nearly three years. It last stood around $17,594, down 0.4%.

The euro was slightly up on the day at $1.1869 rising, despite Poland and Hungary blocking the European Union’s 1.8 trillion-euro ($2.14 trillion) financial package to revive an economy depressed by the COVID-19 pandemic.

Sterling, meanwhile, rose 0.3% versus the dollar to $1.3297 in the wake of a report from the Sun newspaper that Prime Minister Boris Johnson was told by British negotiators to expect a Brussels trade deal early next week, with “a possible landing zone” as soon as next Tuesday.

The dollar though fell 0.3% against the yen to 103.865 , with the Japanese currency recouping much of the losses it suffered last week after Pfizer announced it had developed a working COVID-19 vaccine.

China’s offshore yuan surged to its highest in more than two years against the dollar on Wednesday.

The greenback though recovered to trade 0.2% higher at 6.5619 amid dollar-buying by major state-owned banks in what some traders suspected was an effort to slow the Chinese currency’s advance towards 6.5-per dollar.

The dollar steadied against most currencies on Tuesday as a return of coronavirus restrictions in some U.S. states and worries about a smooth transition for President-elect Joe Biden offset optimism about a coronavirus vaccine.

The British pound edged higher on media reports the UK could reach a post-Brexit trade agreement with the European Union by early next week.

Moderna became the second U.S. pharmaceutical company in a week to report positive results from trials of a Covid-19 vaccine, considered necessary to eradicate the pandemic.

Last week, encouraging progress in coronavirus vaccine testing helped the dollar rise against the safe-harbor yen and the Swiss franc.

However, reaction in the currency market to subsequent developments has been subdued as the United States struggles to contain a second wave of infections, and with vaccine distribution not expected any time soon.

There is also some uncertainty about Biden’s plans to tackle the coronavirus and stimulate the economy as the Trump administration resists cooperation with Biden’s transition team.

“The market reaction has been limited because it will take time to distribute the vaccine, and there is uncertainty about U.S. politics,” said Masafumi Yamamoto, chief foreign exchange strategist at Mizuho Securities in Tokyo.

“Unless we clear that hurdle, the dollar won’t rise. The dollar looks particularly weak against the yuan.”

The dollar was quoted at $1.1858 per euro, on course for its fourth straight session of declines.

Sterling edged up to $1.3221 and also gained to 89.71 pence per euro.

The greenback held steady at 104.52 yen. Investors in the dollar are looking ahead to the release of U.S. retail sales and industrial production later on Tuesday to gauge the health of the economic recovery.

However, policymakers’ response to a record number of coronavirus cases, hospitalizations, and deaths in several U.S. states is likely to remain of greater concern.

The dollar index against a basket of major currencies stood at 92.503, close to a one-week low.

New infections are also increasing in Britain, Europe, and Japan, which further clouds the economic outlook.

The Australian dollar held onto overnight gains against the greenback, while the New Zealand dollar hit its strongest in more than a year as investors scaled back bets for additional interest rate cuts.

Minutes from the Reserve Bank of Australia’s most recent policy meeting showed the central bank was ready to provide yet more policy stimulus if needed after cutting rates to record lows.

The onshore yuan edged up to 6.5678 per dollar, approaching a 28-month high set last week, as positive economic data continues to support the currency.

The dollar lost ground against other major currencies on Monday, while the pound and the euro drew strength from signs that Britain and the European Union could make progress negotiating a post-Brexit trade deal.

Sentiment across markets were mixed, caught between fears of a resurgence of global coronavirus cases and hopes for a working vaccine that could help reignite global growth.

Against a basket of currencies, the dollar softened marginally, fetching 92.565 in Asian trade.

Hopes for Brexit compromise emerged after news Dominic Cummings, the most powerful adviser to Prime Minister Boris Johnson, would leave Downing Street in mid-December.

Meanwhile, Britain’s top Brexit negotiator David Frost said on Sunday that Britain and the EU have made some progress in their post-Brexit trade deal negotiations but might not succeed in getting an agreement.

“This topic remains an uncertain catalyst … The market needs to be cautious that prices could fluctuate nervously on news,” said Sumino Kamei, senior analyst at MUFG Bank.

The British pound edged higher against the dollar, changing hands at 1.3226 per dollar, and against the common currency as well, and last stood at 89.61 pence per euro. The euro last sat 0.16% higher at 1.1854 per dollar.

Global markets surged last week on optimism that a vaccine for Covid-19 would be available soon, with the dollar rising as traders quit their long-yen positions.

“Currency moves which were prompted by vaccine news have taken a pause. With no additional, positive news on the vaccine, U.S. interest rates and stocks went into correction mode at the end of the week, and dollar/yen fell,” Masafumi Yamamoto, chief currency strategist at Mizuho Securities said.

The yen edged higher at 104.49 per dollar, having posted its worst weekly performance since early June last week.

Undermining the greenback more broadly, the total virus cases in the U.S. surpassed 11 million on Sunday as the pace of the pandemic quickened.

While U.S. President Donald Trump still refused to concede defeat in the Nov.3 election, some traders have begun shifting their attention to contenders for President-elect Joe Biden’s cabinet, analysts said.

“Over the weekend, uncertainty around the U.S. presidential election has declined as it became more certain that Joe Biden secured more votes, and it’s easier for traders to take risks on hopes that the next administration would soon take measures against the coronavirus,” Mizuho Securities’ Yamamoto said.

The dollar could strengthen against the yen if U.S. bonds and stocks maintain their upward moment, he added.

Trump on Sunday briefly acknowledged losing the election in a morning Twitter post but then backtracked, saying he concedes “nothing” and vowing to keep up a court fight that election-law experts say is unlikely to succeed.

Meanwhile, Biden focused on tackling the coronavirus pandemic and set meetings with pharmaceutical companies developing vaccines.

Australian dollar traders awaited upcoming events by the Reserve Bank of Australia, with Governor Philip Lowe scheduled to speak later in the day, while the central bank’s November meeting minutes are due on Tuesday.

Analysts also said the China-backed Regional Comprehensive Economic Partnership deal signed by 15 Asia-Pacific economies on Sunday partly helped risk appetite, as investors hoped the world’s biggest trade pact would boost trades and economic ties.

The Aussie firmed marginally at $0.7287 per dollar in Asian trade, buoyed by stronger equities. The kiwi was up 0.42% to $0.6874, near a 20-month high of $0.6915 marked on Thursday.

Data on Monday showed signs of economic recovery in China and Japan, the world’s second and third largest economies. China’s industrial output rose by a faster-than-expected 6.9% in October, while Japan’s economy grew at its fastest pace on record in the third quarter.

The Chinese yuan firmed following the upbeat economic data, rising to 6.5818 per dollar, hitting its one-week high.

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.