Dollar Down, Against Flight to Safety Over Pandemic Woes, Stimulus Stalemate

© Reuters.
© Reuters.

By Gina Lee – The dollar was down on Friday morning in Asia, continuing a downward trend despite investors turning to safe-haven assets over ever surging number of global COVID-19 cases and the U.S. Congress’ continuous stall on passing the latest stimulus measures ahead of the Nov. 3 presidential election

The that tracks the greenback against a basket of other currencies inched down 0.03% to 93.832 by 10:30 PM ET (2:30 AM GMT). However, the dollar saw its largest weekly rise since late September as it has gained 0.8% so far during the past week.

Europe and the U.K. implemented fresh restrictions to curb the spread of the virus, and the number of cases in the U.S. also rose, with Midwestern states battling a surge of new cases as temperatures drop.

The spike in cases on both sides of the Atlantic triggered fears of fresh lockdowns and worries over the detrimental impact on economic recovery.

“Markets fear a slowdown in activity as new virus cases rise … the deterioration is evident everywhere across Europe, which is a major blow to the recovery’s momentum and reinforces deflationary risks,” ANZ bank analysts including Susan Kilsby and David Croy said in a note.

With 898,000 Americans , higher than the 825,000 claims forecast and hitting a two-month high, the data suggested bumps ahead in the road to recovery.

“The data is consistent with the idea that the spread of COVID-19 and removal of fiscal stimulus have seen a stalling of the economic recovery,” NAB FX strategist Rodrigo Catril told Reuters.

Meanwhile, the stalemate over the stimulus measures continues, with Senate Majority Leader Mitch McConnell rejecting an offer by President Donald Trump to raise the price tag on this $1.8 trillion offer.

The pair edged down 0.17% to 105.27. However, the safe-have yen recorded a 0.2% rise for the week.

The Antipodean risk sensitive currencies were mixed, with the AUD seeing losses, but the NZD reporting gains against the dollar. The pair edged down 0.17% to 0.7080, losing 2% for the week as investors are still digesting dovish comments from the Reserve Bank of Australia. Across the Tasman Sea, the pair inched up 0.05% to 0.6596, with Jacinda Arden widely expected to win the general election taking place on Oct. 17.

The pair inched up 0.01% to 6.7420. China’s National People’s Congress Standing Committee is set to adopt a new law restricting sensitive exports vital to national security on Saturday. Once adopted, the law will apply to all companies in China, including foreign-invested ones, and threatens to increase U.S.-China tensions.

The pair edged down 0.19% to 1.2889. Roadblocks between the European Union (EU) and the U.K. as they negotiate their Brexit divorce deal saw heavy selling in the pound overnight. U.K. Prime Minister Boris Johnson is due to respond to the EU’s demand for the U.K. to make compromises or prepare for trade disruptions in less than 80 days, later in the day.

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