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Dollar eases off 7-week low as COVID-19 aid bill in doubt

10/22/2020 | 03:11pm EST
FILE PHOTO: U.S. dollar notes are seen in this picture illustration

NEW YORK (Reuters) - The dollar index ticked higher on Thursday, easing off a seven-week low as hopes for a coronavirus aid package ahead of the U.S. elections faded and COVID-19 cases surged around the world, giving a slight bid to safe-haven assets like the greenback.

Investors were also digesting new U.S. jobless claims data that showed a bigger-than-expected drop, but remained at extremely high levels amid fading fiscal stimulus and a resurgent coronavirus.

U.S. House of Representatives Speaker Nancy Pelosi said on Thursday negotiations toward a new relief bill were making progress and that legislation could be hammered out "pretty soon."

The talks had been thrown into doubt after Republican President Donald Trump took to Twitter late on Wednesday to accuse Democrats of being unwilling to find an acceptable compromise and amid deep opposition among Senate Republicans to a large new stimulus package.

"The market is getting a little tired of going back and forth on the stimulus talks," said Joseph Trevisani, senior analyst at FXStreet.com.

"It doesn't seem right now that either side is going to make enough concessions in view of the election, which makes sense actually, as far as their needs go, to get a deal done," he said.

The stimulus package is likely to come up when Trump faces off against Democratic rival Joe Biden later on Thursday in their final debate ahead of the Nov. 3 vote.

The dollar index <=USD> was last trading at 92.932, up 0.22% and above Wednesday's bottom of 92.469, which marked the lowest level since Sept. 2, but still trading back and forth within a tight range.

"The near possibility that we're going to get more bad news or at least no good news from now to the election is driving investors out of the greenback," said Kathy Lien, managing director at BK Asset Management.

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.

The euro <EUR=EBS> was down 0.35% higher versus the dollar at $1.1820, after hitting a one-month high of $1.18805 on Wednesday.

"The euro has been undeservingly strong, given the significant increases in COVID-19 cases and the fact that the ECB will have no choice but to lower interest rates," said Lien.

PMI reports from the euro zone due out on Friday could trigger a more aggressive move down in the euro, she added.

Having hit six-week highs on Wednesday amid Brexit optimism, sterling pulled back against the U.S. currency. The British pound was last down 0.47% at $1.3082 <GBP=D3>.

The Australian dollar <AUD=D3> dipped 0.01% versus the greenback to $0.7116, while the New Zealand dollar rose 0.44% to $0.6680 <NZD=D3>.

Elsewhere, the Chinese yuan retreated from a 27-month high hit a day earlier on signs the authorities have become increasingly wary over the currency's recent rapid gains.

The offshore Chinese yuan <CNH=EBS> was last trading at 6.6710 per dollar.

(Reporting by John McCrank; additional reporting by additional reporting by Dhara Ranasinghe in London; Editing by Nick Zieminski)

By John McCrank

© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / CANADIAN DOLLAR (AUD/CAD) 0.12% 0.95909 Delayed Quote.5.17%
AUSTRALIAN DOLLAR / JAPANESE YEN (AUD/JPY) 0.07% 76.775 Delayed Quote.0.83%
AUSTRALIAN DOLLAR / NEW ZEALAND DOLLAR (AUD/NZD) 0.00% 1.05048 Delayed Quote.0.69%
AUSTRALIAN DOLLAR / SWISS FRANC (AUD/CHF) 0.30% 0.66896 Delayed Quote.-1.36%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) 0.32% 0.73802 Delayed Quote.4.97%
BRITISH POUND / AUSTRALIAN DOLLAR (GBP/AUD) -0.22% 1.81117 Delayed Quote.-3.85%
EURO / US DOLLAR (EUR/USD) 0.14% 1.19268 Delayed Quote.6.23%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.18% 6.5792 Delayed Quote.-5.69%
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