Dollar Gains Ground on U.S. Stimulus Hopes
The dollar edged a little higher on Tuesday morning in Asia, keeping the momentum from overnight. The surge in COVID-19 cases in the U.S. boosted hopes for more fiscal support, which actually provided some stimulus to the greenback.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies rose 0.09% to 90.868 by 11:22 PM ET (3:22 AM GMT). The U.S. Congress is poised to vote this week on a stopgap funding measure to give lawmakers more time to negotiate an emergency coronavirus stimulus plan. The U.S. government is likely to hammer out a new stimulus deal that could be worth around $908 billion.
“We have seen some hopeful signs of engagement from our Democratic colleagues. But we have no reason to think the underlying disagreements about policy are going to evaporate overnight,” said Senate Majority Leader Mitch McConnell on Monday.
“Markets are focusing more on the prospects of more fiscal stimulus,” Shinichiro Kadota, senior currency strategist at Barclays Capital, told Reuters on Monday.
The new stimulus deal is urgently needed as California imposed new COVID-19 restrictions, under which all but critical infrastructure and retail operations in its worst-hit areas were ordered to shut. A ban on indoor restaurant dining also loomed in New York City.
That said, the greenback still hovered at a two and half year low, dragged down by disappointing U.S. jobs data released last Friday.
In Asia, the USD/JPY pair added 0.02% to 104.04. Japan’s Prime Minister Yoshihide Suga said Tuesday his administration will compile a new COVID-19 economic stimulus package worth JPY73.6 trillion ($708 billion), with fiscal measures at JPY 40 trillion ($385 billion).
The USD/CNY pair also inched up 0.11% to 6.5368. Chinese foreign trade saw a strong recovery, as data released Monday suggested exports jumped more than 21% from the same month in 2019. Market watchers also paid close attention to renewed U.S.-China tensions, after the U.S. announced sanctions on 14 Chinese officials for the crackdown on Hong Kong.
Down under, the AUD/USD pair edged up 0.08% to 0.7426, while the NZD/USD pair was down 0.16% to 0.7031.