NEW YORK, Dec 30 — Thin end-of-year volumes exacerbated broad weakness in the US dollar today, which dipped for three straight sessions and on Friday suffered its biggest one-day fall since March.
The dollar index, which measures the currency against a basket of six rivals, weakened 0.22 per cent to 96.708 in North American trade. With Friday’s loss, the index’s gains for the year have shrunk to around 0.6 per cent, compared to growth of about 4.4 per cent in 2018.
“We’ve had a downdraft in the dollar for the last three-four sessions. It seemed to have accelerated beginning Friday and into today,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.
“I don’t think there’s any fundamental story behind it. Maybe the market stocked up a little bit on long dollar (positions) before the turn, and now there doesn’t seem to be a need for the position. And so it’s bleeding out of a very thin market.”
Some analysts argued the move was a continuation of a trend of weaker demand for dollars on increased optimism about US-China trade relations and the global growth outlook. Improved sentiment, which discourages investors from buying dollars as a safe-haven asset, drove the euro to a 4-1/2-month high of US$1.121 (RM4.61) today. It was last up 0.22 per cent at US$1.120.
Signs that the euro zone economy has turned a corner have lifted the EU single currency in recent weeks.
“The main drivers of the weaker dollar have likely been risk appetite holding up in the wake of US comments pertaining to a Phase 1 trade deal recently, as well as the US Federal Reserve’s continued repo operations, which have recently been undersubscribed,” MUFG analysts said.
Chinese Vice Premier Liu He will visit Washington this week to sign the Phase 1 trade deal with the United States, the South China Morning Post reported today.
China’s yuan strengthened to touch 6.9742 in the offshore market, its highest since December 13.
Sterling was last trading 0.34 per cent stronger against the dollar at US$1.312.
Against the euro, the pound recovered earlier losses and was last up 0.08 per cent at 85.36 pence. Concerns that Britain is headed for a disruptive “hard Brexit” at the end of 2020 had been hurting the pound since mid-December. — Reuters
