FX Rate News

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.”

The dollar edged up from seven-week lows on Thursday as hopes for a fiscal package in the United States before the November elections crumbled again and the global surge in COVID-19 cases fuelled demand for safe-haven assets like the greenback.

Progress towards a U.S. stimulus deal has boosted sentiment in world markets and lifted demand for riskier assets in recent sessions — weighing this week on the dollar, which tends to weaken when risk appetite picks up.

But pressure on the currency eased after U.S. President Donald Trump on Wednesday accused Democrats of being unwilling to craft an acceptable compromise.

News that Europe has seen the number of coronavirus cases surge to a record high, with Spain becoming the first Western European country to exceed 1 million infections, added to the cautious tone in world markets.

This backdrop appeared to favour the dollar, which had fallen for the last three days against a basket of other major currencies.

“There are a host of risk events that you could argue threatens risk assets and those threats should support the dollar,” said MUFG’s head of research, Derek Halpenny.

“Yesterday’s moves were so significant, and with no new news to follow through on, there is a modest recovery in the dollar.”

The dollar index was last trading at 92.863, a touch firmer on the day and above the 92.469 low hit on Wednesday that marked the lowest level since Sept. 2.

The euro was a quarter of a percent lower at $1.18325, down from Wednesday’s one-month highs of $1.18805.

And the dollar was firmer against Japan’s currency at 104.73 yen, above a one-month low hit during the previous session at 104.345.

The tone in currency markets was generally subdued as investors waited for new impetus. A final debate between President Trump and Democratic rival Joe Biden takes place later in the day.

“The U.S. Presidential elections are only 12 days away, before that nobody wants to commit too much to a particular direction in euro/dollar,” said Commerzbank FX analyst Esther Reichelt.

Having hit six-week highs on Wednesday amid Brexit optimism, sterling too pulled back against the U.S. currency. The British pound was last down 0.4% at $1.3093.

The Australian dollar was 0.3% softer versus the greenback, while the New Zealand dollar was a touch firmer at $0.6658 — up from the $0.6551 low touched on Tuesday.

Elsewhere, the Chinese yuan retreated from a 27-month high on signs that the authorities have become increasingly wary over the recent rapid gains in the currency.

The offshore Chinese yuan was last down 0.4%at 6.6724 per dollar.

The U.S. dollar dipped on Tuesday, hitting a one-month low against a basket of major currencies, as investors awaited the outcome of fiscal stimulus talks ahead of the upcoming U.S. presidential election and coronavirus cases spiked in Europe.

The dollar index declined for a second day, with the safe-haven currency hitting 92.991, its lowest since Sept. 21, as House Speaker Nancy Pelosi she was optimistic Democrats could reach a deal with the Trump administration on additional COVID-19 relief that could get aid out by early next month.

The euro, last up 0.49%, hit a one-month high of $1.184 versus the greenback, after having weakened 0.1% to $1.17600 in early London trading.

“You have to think about U.S. dollar weakness as a possible longer-lasting fixture,” said Yousef Abbasi, global market strategist at StoneX.

While fiscal stimulus talks have been at an impasse, investors are looking beyond the Nov. 3 elections, he said.

“The most optimistic stimulus story is the ‘blue wave’ stimulus story: Biden gets the White House, the Senate turns Democrat, and boom, we unlock $4 trillion to $5 trillion in spending in 2021, related to stimulus, some of the Biden initiatives on infrastructure, green energy and things like that,” he said.

While markets are confident a win by Biden would lead to more fiscal stimulus, investors are also wary of a potentially contested election result that might boost the greenback’s safe-haven appeal.

“As we approach U.S. elections and with COVID infections around the globe rising at a fast pace, investors may refrain from engaging into large trading positions,” said Charalambos Pissouros, a senior market analyst at JFD Group.

France reported a massive jump in people hospitalized and Ireland announced some of Europe’s toughest restrictions.

Still, markets have stayed within recent ranges with foreign exchange volumes dropping amid rising uncertainty in both the United States and Europe.

“Currency markets are in wait-and-watch mode with traders unwilling to take big bets before such a major event risk,” said Lee Hardman, currency strategist at MUFG in London.

Sterling dipped 0.07% to 1.2941.

Britain’s chief Brexit negotiator David Frost said there was no basis to resume trade talks with the European Union unless there was a fundamental change in Brussels’ approach.

The pound’s resilience to negative news flows pointed to optimism that a deal will eventually go through, said Stephen Innes, chief global market strategist at Axi.

“Let’s hope constructive progress endures. It feels like we are playing a pinball machine, getting bounced around but not going anywhere these days,” he said.

On the data front, U.S. single-family homebuilding surged to a more than 13-year high in September amid record-low mortgage rates and a migration to the suburbs and low-density areas in search of more room for home offices and schooling.

“These data suggest construction is blazing a trail as the economy normalizes amid the COVID-19 crisis,” ANZ Research said in a note to clients.

Elsewhere, the safe-haven yen edged up 0.05% against the dollar to 105.4650.

The dollar paused on Friday but remained on track for its biggest weekly gain in a month amid growing market caution over a global surge in coronavirus cases and fading prospects of a U.S. stimulus package before the Nov. 3 election.

Fresh curbs to combat COVID-19 have been introduced across Europe while the U.S. Midwest is also battling record spikes in new cases as data shows the country’s economic recovery is losing steam.

Investors will get a further indicator of the health of the U.S. economy with retail sales data due later on Friday. Relief plans remain bogged down in a three-way negotiation between the White House, Senate Republicans and House Democrats.

The dollar and Japanese yen are both on track for weekly gains on investor appetite for safe haven assets, of 0.7% and 0.4% respectively.

The greenback hugged a tight range in morning trading in Europe on Friday, with the dollar index last down 0.1%. The euro strengthened slightly, last up 0.1%.

On a monthly basis, the dollar index is up 0.7%, its biggest rise since end-September.

“The fight against corona is not a sprint but a marathon and that is becoming increasingly clear on the FX market too,” said Esther Reichelt, FX analyst at Commerzbank, in a note.

“The winners will be all those economies and their respective currencies that do best at overcoming the economic challenges posed by the pandemic…Until then, the FX market will be dominated by risk considerations.”

Sterling gained around a third of a percent as markets waited for British Prime Minister Boris Johnson to set out his response to the European Union’s demand for more concessions in Brexit talks.

He had previously set Oct. 15 as a deadline for a deal to be reached. Britain’s Foreign Secretary Dominic Raab said on Friday there was still a trade deal “to be done”.