The dollar slips as risk-sensitive currencies advance

  • The US dollar index has changed little
  • Risk-sensitive Australian dollar appreciation
  • The pound rebounds after historic fall

NEW YORK, Dec. 21 (Reuters) – The US dollar edged down on Tuesday as improving risk sentiment boosted riskier currencies such as the Australian dollar and British pound.

The US dollar currency index was last at 96.47, down 0.03% on the day, after slipping to 96.336 earlier in the session. The index, which is up around 7% for the year, fell 0.1% on Monday as traders sold off the greenback to post profits in the dying days of the year.

Risk appetite took a hit on Monday after US Senator Joe Manchin, a conservative Democrat who is key to President Joe Biden’s hopes of passing a $ 1.75 trillion domestic investment bill – known as Build Back Better – said on Sunday that it would not back the package, causing a massive sell-off in global markets. Read more

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The surge in Omicron coronavirus cases has also prompted investors to seek safe havens such as the Japanese yen and Swiss franc .

Stocks rebounded and bond yields rose on Tuesday as investors looked past recent setbacks.

“We expect trading on a wider range to expand during the holiday season,” Shaun Osborne, chief forex strategist at Scotiabank, said in a note.

The risk-sensitive Australian dollar rebounded on Tuesday, ending a two-day weakening streak to trade up 0.60%.

The rebound in global risk appetite also pushed the pound up against the dollar and the euro, even as British Prime Minister Boris Johnson warned that further foreclosure measures may be needed to fight the spread of the virus. Read more

Despite the greenback’s poor performance this week, the dollar index is still close to the 16-month high of 96.938 reached in late November. Investors remain optimistic about the greenback’s outlook, with the latest positioning data close to the highest levels for more than two years. Read more

The Fed’s hawkish statement last week that it would speed up the unwinding of its asset purchases, paving the way for three-quarter percentage point rate hikes in 2022 – should keep the dollar well supported.

“We continue to anticipate the USD and CAD to advance against the majors in the new year as investors bank on monetary policy tightening introduced by the Fed and the Bank of Canada respectively,” said Osborne.

The slowdown in the Canadian economy caused by the coronavirus pandemic has diminished significantly, the Governor of the Bank of Canada said on Wednesday, a key sign that the central bank should start raising rates soon. Read more

The loonie was up about 0.2% on Tuesday.

In other exchanges, the Turkish lira rose about 7% against the US dollar, extending its historic rally from record lows after President Tayyip Erdogan unveiled a plan he said would guarantee deposits in local currency against market fluctuations. Read more

Bitcoin gained 3.5% to $ 48,558 after trending down the past few weeks.

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Price of currency offers at 3:37 p.m. (2037 GMT)

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Reporting by Saqib Iqbal Ahmed; Editing by Dan Grebler and Nick Zieminski

Our Standards: Thomson Reuters Trust Principles.

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Myra R.

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