EUR, AUD Gain, Disregarding Trumps Threat to Block Stimulus

The euro rose back towards $1.22 and the dollar declined on Wednesday as foreign exchange traders looked beyond U.S. President Donald Trump’s threat not to approve a $892 billion COVID-19 aid package.

Trump said the long-awaited stimulus package should be amended to increase the amount in the stimulus checks — potentially disrupting the bill.

But foreign exchange markets were little changed, with the dollar edging lower and currencies deemed riskier, such as the Australian dollar, making solid gains.

“The financial markets have not reacted notably to this threat from President Trump to block the package – our sense is there remains an expectation that Trump will sign it in the end,” MUFG analysts said in a research note.

They added that the market’s indifference could shift to risk aversion and a rebound for the dollar if Republicans in the Senate blocked Trump’s larger stimulus demand.

By 0835 GMT, the dollar was 0.1% lower against a basket of currencies.

The dollar index has dropped more than 6% this year as investors bet the U.S. Federal Reserve will keep its policy ultra-easy. Expectations for further declines by the dollar are helping buoy stock markets and emerging-market currencies.

The euro climbed 0.2% to $1.2183.

Sterling rose nearly 0.5% to $1.3442 amid speculation the European Union and Britain will announce a Brexit trade deal on Wednesday.

The pound has been jolted up and down on hopes for a deal before Britain’s Brexit transition period ends on Dec. 31. Most foreign exchange traders think a deal will be agreed, even with so little time left to forge and ratify an arrangement.

“The market is just waiting for the final result of Brexit talks, and in the meantime being swung by conflicting headlines,” said Shinichiro Kadota, senior currency strategist at Barclays Capital in Tokyo. “Sterling will remain volatile.”

Elsewhere, the Australian dollar gained 0.7% to as high as $0.7575, boosted by signs that a small COVID-19 outbreak in Sydney would be contained.

The dollar dropped 0.2% against the Japanese yen, another safe haven, to 103.44.

The U.S. currency was down 0.2% versus the Chinese yuan in the offshore market to 6.5266.

Additional reporting by Kevin Buckland in Tokyo; editing by Larry King

Source: Reuters

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