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Dollar under pressure as economic uncertainties linger

EconomyAug 18, 2020 09:50PM ET
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© Reuters. FILE PHOTO: Four thousand U.S. dollars are counted out by a banker at a bank in Westminster

By Eimi Yamamitsu

TOKYO (Reuters) - The dollar struggled to recoup heavy overnight losses on Wednesday after it slipped to 27-month low the previous session as uncertainties about an economic recovery and the U.S. fiscal stimulus package weighed.

The dollar hit fresh lows against most major currencies overnight as the ongoing effects of the Federal Reserve's stimulus programmes weakened the greenback broadly and lifted U.S. stock indexes to record highs.

The dollar (=USD) last sat at 92.179 against a basket of currencies.

The euro (EUR=EBS) changed hands at $1.1949, having strengthened to its highest level since May 2018 in the previous session.

Sterling edged above Tuesday’s eight-month high of $1.3241, last quoted at $1.3255.

“There is a strong momentum for investors to want to sell the dollar,” said Juntaro Morimoto, an analyst at Sony (NYSE:SNE) Financial Holdings, pointing that the greenback has been declining since last month.

Although the dollar often functions as a safe-haven investment in times of crisis, it has fallen since the Federal Reserve's intervention into financial markets to maintain liquidity in the midst of the COVID-19 pandemic.

The Fed's programmes have pushed risk assets to all-time highs and reduced demand for safe-havens, even as economic data has painted a bleak picture of the U.S. recovery.

In commodities market, a softening dollar kept gold elevated, with spot gold last trading at $2,002.1 per ounce.

An agreement over a new round of federal stimulusspending remained elusive, although U.S. House of Representatives Speaker Nancy Pelosi said on Tuesday that Democrats in Congress are willing to cut their coronavirus relief bill in half to get an agreement on new legislation with the White House and Republicans.

Providing additional headwind for the dollar, President Donald Trump on Tuesday said a big shift to mail-in voting in the November presidential election could cause so many problems officials might have to re-do the vote.

On the data front, Japan's official data on exports fell 19.2% in July from a year earlier, beating economists' forecast of 21% decrease, while the country's core machinery orders fell 7.6% in June from the previous month.

Against the yen , the dollar last sat at 105.17 yen.

Investors await the release later on Wednesday of the minutes from the July 28-29 FOMC meeting, with speculation the Fed will adopt an average inflation target, which would seek to push inflation above 2% for some time.

The risk-sensitive Australian dollar traded near $0.7255, while the kiwi last bought $0.6611.

Dollar under pressure as economic uncertainties linger
 

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Comments (4)
Ioannis Lazaridis
Ioannis Lazaridis Aug 19, 2020 2:20AM ET
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Very well written report.
Okeanu chris
Okeanu chris Aug 19, 2020 1:31AM ET
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Why is it that USD is weak,us stock like us30 is moving high?
perplexed76 .
perplexed76 . Aug 19, 2020 1:31AM ET
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all weak dollars go to us30
Plopseven Schwartz
Plopseven Schwartz Aug 19, 2020 12:45AM ET
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Oh wow, apparently “print trillions of dollars instead of wearing masks” wasn’t a good economic policy. Trump, you destroyed this country - permanatly.
Gary Friauf
Gary Friauf Aug 18, 2020 10:08PM ET
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So gold has always been a safe haven when things get tough in the market. How are the gold prices justified when the S&P just got back to a record high today? Is it because of the lousy USD?
Lavetty Tshabalala
Lavetty Tshabalala Aug 18, 2020 10:08PM ET
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I think the reason being is that Gold is a natural resource. It doesn't depend on what the world is facing.
Ioannis Lazaridis
Ioannis Lazaridis Aug 18, 2020 10:08PM ET
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Hi. Your question is in the centre of all conversations since last March. We see S&P 500 climbing higher and higher and gold price do the same. This happens because the dollar and the bonds under the current conditions have lost their status as stored of wealth. Both are so weak that shares look a better investment. Gold always performs well when real bond yields are negative. Hope my comment helps.
Gamer Turtle
GamerTurtle Aug 18, 2020 10:08PM ET
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if USD is losing its value due to our economic status then our equity market should also be under pressure, money can't be money into bond, out of dollar but at same time into equity... it's all weird at the moment.
 
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