Dollar Up as U.S. and U.K. Scramble to Meet Stimulus and Brexit Deadlines
By Administrator_India
The dollar was up on Thursday morning in Asia, as the U.S. and the U.K. both scramble to meet deadlines for the latest stimulus measures and Brexit trade talks with the European Union (EU) respectively
The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.05% to 91.075 by 9:44 PM ET (1:44 AM GMT), just above the two-and-a-half-year low of 90.471 seen on Friday.
Investors turned to the dollar, viewed as a safe-haven asset, as doubts begin to mount on whether the Republicans and Democrats can reach a consensus over the latest stimulus measures. The two sides have until Dec. 11 to do so, in order to avert a government shutdown. However, it remains to be seen whether the two parties can agree on one of the proposals and counter proposals currently flying around Congress.
The Federal Reserve will convene for its last policy meeting of 2020 later in the day.
The GBP/USD pair was down 0.24% to 1.3364, staying above the week’s low of $1.3225 seen on Monday after falling around 0.5% on Thursday. This was after U.K. Prime Minister Boris Johnson and European Commission President Ursula von der Leyen agreed to delay a “firm decision” about the future of Brexit talks during their meeting.
Despite a “lively” dinner with Johnson, von der Leyen warned afterwards that the European Commission and the U.K. remain “far apart” on the trade deal.
Bank of England Governor Andrew Bailey issued a warning of his own, saying that a no-deal Brexit would cause longer-term damage to the U.K.’s economy than even the COVID-19 pandemic, with the impact of the change potentially felt for decades.
The outcome disappointed some investors, who hoped that the dinner to bring some resolution to the stalemate between the two parties before the end-of-year deadline.
“It looks like there won’t be any agreement to present to the EU summit starting today. Markets have been quite optimistic about a deal. I’m a bit surprised,” Sumitomo Mitsui Trust Bank senior market economist Ayako Sera told Reuters.
Sera was referring to the European Council, which will meet from Dec. 10 to 11 in Brussels. The European Central Bank (ECB) is also convening for its last policy meeting of 2020 later in the day, where it is widely expected to expand stimulus measures to support the COVID-19-stricken EU economy.
ECB President Christine Lagarde has already made it clear in recent weeks that an expanded Pandemic Emergency Purchase Program and more subsidized long-term loans for banks will form the basis of the ECB’s policy measures.
The euro fell to $1.2082, a fourth consecutive day of losses and slightly below the two-and-a-half year high of $1.2177 seen on Friday. Lagarde’s comments have also reduced investor appetite for the euro.
The USD/JPY pair inched up 0.05% to 104.27.
The AUD/USD pair inched up 0.07% to 0.7450, with the AUD retreating from a two-and-a-half year high of $0.7485 seen on Wednesday. The NZD/USD pair inched down 0.01% to 0.7018.
The USD/CNY pair edged up 0.11% to 6.5483. The offshore Chinese yuan was also hovering just below a two-and-a-half year high seen on Wednesday.
