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Dollar Down, Investors Await Fed Guidance Amid Market Jitters

Published 01/25/2021, 09:19 PM
Updated 01/25/2021, 09:23 PM
© Reuters.

© Reuters.

By Gina Lee

Investing.com – The dollar was down on Tuesday morning in Asia, after seeing small gains earlier in the session amid ever-rising numbers of global COVID-19 cases and doubts over both the size and speed of further U.S. stimulus measures. Investors were also cautious ahead of the Federal Reserve’s policy meeting, due to open later in the day.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.04% to 90.308 by 9:10 PM ET (2:10 AM GMT).

The previous session saw a rally in bonds and a breather in U.S. shares as a more cautious mood overtook the market. The move saw the index sit roughly in the middle of a range seen during the past two weeks.

The USD/JPY pair inched down 0.03% to 103.69.

The AUD/USD pair inched up 0.05% to 0.7712, with Australian markets closed for a holiday. The NZD/USD pair inched down 0.03% to 0.7194.

The USD/CNY pair inched down 0.11% to 6.4715 and the GBP/USD pair inched down 0.01% to 1.3672.

“Markets have come a long way on the hope that COVID-19 goes away and governments spend a lot of money,” Westpac currency analyst Imre Speizer told Reuters.

“Both of those have stalled at the moment, and so markets will stall as well ... one of those needs to break to give you direction for the next couple of weeks,” he added.

Democrat wins in the Georgia Senate runoff election at the beginning of the month gave the party control of Congress. Although the victories raised investor hopes that the $1.9 trillion stimulus package proposed by President Joe Biden earlier in the month could have a smoother path towards being passed, all-too familiar disagreements with Republican lawmakers are already proving to be obstacles and soured risk appetite.

Positioning data revealed that bets on a continuously falling dollar, with the greenback extending a downward trend that began in March 2020, saw highs not seen in almost ten years.

Meanwhile, the U.S. is due to release a slew of economic data throughout the week, including the fourth quarter GDP. The data is expected to show that the country’s economic recovery has weakened as it continues to fight surging numbers of COVID-19 cases. The Fed, in turn, is expected to maintain the current easy policy when it hands down its policy decision on Wednesday.

“Q4 U.S. GDP is expected to show a very sharp deceleration,” ANZ analysts said in a note to clients.

“Support from the Fed and fiscal intervention is badly needed, and we expect the Fed will dismiss any suggestion of early tapering,” the note added.

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