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Dollar Down Despite Uncertainty Remaining Over Stimulus Package

ForexSep 24, 2020 10:00PM ET
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© Reuters.

By Gina Lee – The dollar was down on Friday morning in Asia, after earlier gains were reversed over lingering doubts about the latest U.S. stimulus package. Meanwhile, the Chinese yuan was boosted by the inclusion of Chinese debt to FTSE Russell’s World Government Bond (WGBI) index.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.03% to 94.365 by 9:52 PM ET (1:52 AM GMT).

U.S. markets rose on Thursday over increased hopes that the U.S. Congress would break a months-long impasse to pass the latest COVID-19 stimulus measures. Democrats in the U.S. House of Representatives announced that they are working on a $2.2 trillion COVID-19 stimulus package that could be voted on next week. There is also a suggestion that House of Representatives Speaker Nancy Pelosi and U.S. Treasury Secretary Steven Mnuchin could resume stalled stimulus talks.

But some investors remained skeptical on whether Congress will overcome the impasse. U.S. President Donald Trump refused to commit to a peaceful transfer of power should he fail to be re-elected in November’s presidential elections, increasing the chances of a disputed election.

Meanwhile, data released on Thursday showed that the number of Americans claiming unemployment over the past week increased to 870,000, indicating a slowdown in the economic recovery and highlighting the pressing need for Congress to pass the support measures.

“We have seen lately the dollar gaining as risk assets are sold off. We need to see whether this will continue beyond the end of this month,” Daiwa Securities senior strategist Yukio Ishizuki told Reuters.

The USD/JPY pair inched up 0.07% to 105.47.

The USD/CNY pair was down 0.22% to 6.8123. The offshore yuan reversed its decline over the past week after FTSE Russell’s announcement that Chinese government bonds will be added to the WGBI index starting in 2021.

“Foreign ownership of Chinese government bonds has picked up steadily. The inclusion in the WGBI benchmark will prompt additional foreign flows into the Chinese bond market and support the yuan,” Commonwealth Bank China economist Kevin Xie told Reuters.

The AUD/USD pair edged up 0.14% to 0.7055 and the NZD/USD pair inched up 0.02% to 0.6551.

The GBP/USD pair inched up 0.04% to 1.2754. The pound was supported by U.K. Chancellor of the Exchequer Rishi Sunak’s ‘winter plan’ proving limited support for workers as the country continues to battle against a second wave of COVID-19.

Dollar Down Despite Uncertainty Remaining Over Stimulus Package

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Comments (2)
Tomas Bakos
Tomas Bakos Sep 25, 2020 9:28AM ET
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i don't see HBP/ USD going any higher. The UK is in all kind of troubles. i wish them all the best divorcing the EU.
Olayinka ALLI BALOGUN Sep 25, 2020 2:01AM ET
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The AUD/USD and NZD/USD looks renouncing upward to 300 pips from Thursday's closing price.
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