By Gina Lee
Investing.com – The dollar was down on Wednesday morning in Asia, hovering near its lowest levels in two and a half years as cautious optimism that the U.S will restart stimulus talks improved risk appetite.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged down 0.16% to 91.148 by 11:31 PM ET (3:31 AM GMT). The index hit 91.263, its lowest level since April 2018, overnight.
U.S. Treasury Secretary Steve Mnuchin and House of Representatives Speaker Nancy Pelosi held their first talks for the latest stimulus measures since the Nov. 3 presidential elections. Mnuchin will also review the proposed $908 billion worth of measures laid out by a bipartisan group of senators and House members, Pelosi said.
Meanwhile, Senate leader Mitch McConnell said on Tuesday that Congress should include a fresh wave of measures in a $1.4 trillion spending bill, aimed at heading off a government shutdown amid COVID-19. McConnell also teased a revised version of his own plan to fellow Republicans on the same day.
However, some investors were unconvinced that the talks will lead to a consensus on the measures.
“The currency market is skeptical whether these proposals could be agreed in a swift manner, since hopes were shattered once already when a stimulus package didn’t come into fruition before the presidential election … traders are closely eyeing for convincing clues that the agreement is actually reached,” Mizuho Securities chief currency strategist Masafumi Yamamoto told Reuters.
U.S. Federal Reserve Chairman Jerome Powell expressed caution during Tuesday’s hearing before the Senate Banking Committee, warning that the U.S. economy remains in a damaged and uncertain state.
Powell and Mnuchin also urged Congress to provide more help for small businesses amid a surging coronavirus pandemic and concern that relief from a vaccine may not arrive in time to keep them from failing.
Powell is due to testify before Congress again later in the day, and the Fed meets for its policy meeting on Dec. 15 to 16.
Weaker-than-expected manufacturing activity data for November, including the ISM Manufacturing Purchasing Managers Index (PMI), alongside speculation on whether the Fed will move to support the U.S. economy before COVID-19 vaccinations are made available, weighed on the dollar.
The USD/JPY pair inched up 0.09% to 104.39.
The AUD/USD pair edged up 0.18% to 0.7382. The AUD got a boost from data released by the Australian Bureau of Statistics earlier in the day showing that GDP grew 3.3% quarter-on-quarter, above the 2.6% growth in forecasts prepared by Investing.com and the second quarter’s 7% contraction. The GDP shrank 3.8% year-on-year, above the forecast 4.4% contraction and the 6.3% contraction reported in the second quarter.
The Reserve Bank of Australia kept its December interest rate unchanged at 0.10%, as widely expected, on Tuesday.
The NZD/USD pair inched up 0.07% to 0.7068, hovering near the highest level since April 2018 seen overnight.
The GBP/USD pair inched up 0.06% to 1.3422. The pound remained near a three-month high, with U.K. and European Union (EU) negotiators work to reach a Brexit trade deal before the following week. Although the talks have reportedly entered the “tunnel” stage, there were warnings on Tuesday that the talks remained deadlocked over issues such as fishing, governance rules and dispute resolution.Leave a comment