Dollar Up Over Positive U.S. Data, COVID-19 Concerns
SignalsFactory - The dollar was up on Wednesday morning in Asia, holding onto gains from the previous session on the back of positive economic data from the U.S. and concerns over the COVID-19 outbreak in Europe.
COVID-19 cases also continue to rise in the U.S., with the number of deaths in the country surpassing 200,000 and the number of cases approaching 6.9 million as of September 23, according to Johns Hopkins University data.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.18% to 94.162 by 9:38 PM ET (1:38 AM GMT), after reaching eight-week highs on Tuesday.
The U.S. data showed that existing home sales surged to 6 million in August, the highest level in nearly 14 years. But investors are also digesting comments from Chicago U.S. Federal Reserve President Charles Evans, who said on Tuesday that the U.S. economy risks a longer, slower recovery and “recessionary dynamics” if Congress fails to pass the latest fiscal stimulus package. He also hinted that it might be possible for the Fed to raise interest rates before inflation starts to average 2%.
All eyes are on whether the Senate will pass the stopgap funding bill to keep the federal government running through December 11, which was passed by the House of Representatives on Tuesday.
Although the dollar is likely to continue its upward trajectory in the short term as European COVID-19 cases continue to rise, continued uncertainty over November’s U.S. presidential elections could potentially expose the greenback to volatile swings.
“Some people are betting for more dollar strength against the euro, which looks overvalued,” Mizuho Securities chief currency strategist Masafumi Yamamoto told Reuters.
“The picture in Europe has completely changed because the economic recovery is stalling and there is a second wave of the virus, but I’m also worried about U.S. politics,” he warned.
The USD/JPY pair was up 0.21% to 105.14 as Japan returned from a national holiday.
The AUD/USD pair fell 0.54% to 0.7136. Across the Tasman Sea, the NZD/USD pair was down 0.47% to 0.6603. The Reserve Bank of New Zealand will meet later in the day and is widely expected to leave its official cash rate at record low levels, as well as give an updated assessment of the economic outlook.
The USD/CNY pair edged up 0.15% to 6.7881. The GBP/USD pair inched down 0.05% to 1.2725, after touching lows not seen since late July, after U.K. Prime Minister Boris Johnson on Tuesday announced new restrictive measures. The measures are likely to be in place over the next six months, with Johnson urging Britons to work from home.