SINGAPORE, Oct 1 — The dollar was on the defensive at a one-week low today, as robust US data and fresh hopes for US fiscal stimulus had investors confident enough about economic recovery prospects to seek out riskier currencies.
US Treasury Secretary Steven Mnuchin told reporters that talks with House Speaker Nancy Pelosi “made a lot of progress” on long-awaited Covid-19 relief legislation.
Along with strong US labour and manufacturing data, that helped stocks to rally and the mood pulled the US dollar to a one-week low of 93.664 against a basket of currencies.
Early in the Asia session the New Zealand dollar extended gains to a one-week peak of US$0.6623. The Aussie rose 0.1 per cent to US$0.7170, a fraction below a one-week top of US$0.7175 made overnight.
Mnuchin said later on Fox Business News that he would not accept the Democrats' proposed US$2.2 trillion (RM11.76 trillion) aid package, rather something closer to US$1.5 trillion, adding that an agreement had been reached on direct payments to Americans.
“The two sides have come a long way,” said Westpac FX analyst Sean Callow.
“The rhetoric is reasonably conciliatory, I think we're getting closer,” he said, adding an agreement would help the mood in equity markets and likely spill over into currency trade, boosting riskier currencies at the US dollar's expense.
At the same time, jobs figures that showed US private employers stepped up hiring harder than forecast last month and that midwest manufacturing grew faster than expected also fed in to the positive sentiment.
Chinese data yesterday had also shown the recovery on track in the world's second-biggest economy.
The yuan edged up to a week-high 6.7804 in offshore trade today, though volumes are thin and the onshore market closed for holidays until October 9.
Nevertheless, firmness in the safe-haven Japanese yen indicated that plenty of underlying caution still remains. The yen held at 105.45 in Asia today, after climbing in the wake of a chaotic first US presidential debate.
It ended its quarter since mid-2019 yesterday with a 2.4 per cent gain over the three months to September 30 as some of the exuberance in risk assets wore off, particularly in September.
Gains in the euro overnight were also muted after European Central Bank President Christine Lagarde hinted that a strategy overhaul, and a more accommodative approach to inflation, could be possible.
The euro edged up 0.2 per cent yesterday and held at US$1.1726 today. The pound was steady at US$1.2921.
Final purchasing managers index figures are due in Europe and Britain later today, followed by the ISM manufacturing survey in the United States and jobless claims data — all providing an update on the progress of the global coronavirus recovery.
Speeches from Bank of England Chief Economist Andy Haldane, at 1020 GMT, and ECB Chief Economist Philip Lane, at 1545 GMT, will also be closely watched for hints as to the next monetary moves. — Reuters
