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Dollar on backfoot as hopes fade for U.S. stimulus deal

ForexAug 12, 2020 08:20PM ET
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© Reuters. U.S. dollar notes are seen in this picture illustration

By Stanley White

TOKYO (Reuters) - The dollar nursed losses against most of its peers on Thursday amid fading hopes for a compromise between Republicans and Democrats over additional economic stimulus.

In Asia, the focus was on the Australian dollar ahead of data that is expected to show slowing jobs creation and rising unemployment as a resurgence of the coronavirus rocks the economy.

The greenback was hampered by a decline in Treasury yields, but analysts say this is likely only a temporary setback because U.S. lawmakers will eventually agree to more stimulus to support economic recovery from the coronavirus.

"The dollar needs positive news on stimulus to rise further, but I'm sure we'll get there, because these politicians can't go back to their constituencies empty handed," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

"Once this happens, gains in dollar/yen could be a catalyst for dollar gains against other currencies."

Against the euro (EUR=D3), the dollar traded at $1.1786 following a 0.4% decline on Wednesday.

The British pound held steady at $1.3034.

The dollar was quoted at 0.9122 Swiss franc after falling around half a percent against the safe harbour currency during the previous session.

The dollar fared slightly better against the yen, trading at 106.87, near a three-week high.

President Donald Trump accused congressional Democrats on Wednesday of not wanting to negotiate over a U.S. coronavirus aid package as top Republican and Democratic negotiators traded blame for a five-day lapse in talks over relief legislation.

The pandemic has taken a particularly heavy toll on the United States, where it has killed more people than any other country. Millions of U.S. workers have lost jobs, and supplemental federal unemployment benefits expired last month.

Market sentiment has swung between optimism and pessimism, but analysts argue that more stimulus is the most likely outcome because without it the U.S. economic recovery could stall.

The U.S. dollar index against a basket of major currencies fell 0.3% on Wednesday but is still well above the two-year low it reached last week.

Elsewhere in currencies, the Australian dollar was little changed at $0.7165 as traders braced for the closely-watched jobs report for July.

A resurgence of coronavirus cases in Melbourne has rattled confidence in Australia's economy.

Across the Tasman Sea, the New Zealand dollar bought $0.6577, stabilising after the country's central bank expanded quantitative easing and flagged the prospect of negative interest rates.

Dollar on backfoot as hopes fade for U.S. stimulus deal
 

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Comments (8)
Shazwan Shatar
Shazwan Shatar Aug 13, 2020 1:41AM ET
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if no stimulus dollar should rise, due to risk-off
Shazwan Shatar
Shazwan Shatar Aug 13, 2020 1:40AM ET
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if no stimulus, the dollar should rise due to risk-off.
Doug Frederes
Doug Frederes Aug 12, 2020 11:53PM ET
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Get ready for the $100 happy meal
George Pichurov
George Pichurov Aug 12, 2020 11:18PM ET
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How is more printing bullish for dollar?
Zach Lohman
Zach Lohman Aug 12, 2020 11:18PM ET
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Handing out more iou’s makes all of them more valuable. Basic law of supply. lol!
Cobra Coin
Cobra Coin Aug 12, 2020 11:18PM ET
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It is not. This article doesn't make sense.
perplexed76 .
perplexed76 . Aug 12, 2020 11:18PM ET
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the key word is FADE
bryan cooper
bryan cooper Aug 12, 2020 11:06PM ET
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maybe the pols will change their minds when negative economic data starts coming in over the next few weeks.
Notvery Goodathis
Peteymcletey Aug 12, 2020 10:46PM ET
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Stimulus is what devalued dollar along with the fed.....
Gary Friauf
Gary Friauf Aug 12, 2020 9:02PM ET
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It just amazes me, we vote these politicians into office every couple years to do what?? If both sides are convinced we need more stimulus then pass something. If there wasn't an election coming up this would have been passed weeks ago.
Plopseven Schwartz
Plopseven Schwartz Aug 12, 2020 9:02PM ET
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The problem is that the original CARES act allocated lots of money from the treasury and most of it went to corporations, not citizens in need. Even the PPP loans were given out to millionaires, political donors and churches when they could have been better spent given to the average citizen.
Neag Catalin
Neag Catalin Aug 12, 2020 9:02PM ET
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go to work. governmental aid it's for disabled... and stop hoping for free money by doing nothing
Jay West
Jay West Aug 12, 2020 9:02PM ET
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Dude, aint no jobs to go back to as long as the Dems keep businesses jumping through hoops in order to reopen. Most restaurants cannot offer outdoor dining. People are not traveling and staying in hotels. Tourism industry got it bad. So take your thoughtless generalized blanket comments and shove it.
Strela Fxxx
Strela Fxxx Aug 12, 2020 8:42PM ET
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The ECB will destroy the economy with a strong euro!
 
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