Safe haven dollar dips on hopes for U.S. stimulus deal

Dollar steady elsewhere as election risks temper bets

  
U.S. currency is seen in this picture illustration taken March 6, 2020.

U.S. currency is seen in this picture illustration taken March 6, 2020.

REUTERS/Mike Segar/Illustration

NEW YORK- The dollar edged lower on Monday as investors revived bets that an agreement in Washington on a fiscal stimulus package could be reached ahead of the upcoming U.S. election, and on hopes of a coronavirus vaccine by year-end.

The dollar index was down 0.45%, giving back some of its 0.7% rise from last week when a global surge in coronavirus cases and an impasse over the stimulus package stoked caution.

The move out of the safe-haven greenback came after House Speaker Nancy Pelosi said that, while differences remained with President Donald Trump's administration on a wide-ranging coronavirus relief package, she believed legislation could be pushed through before Election Day.

"There is growing optimism that there is going to be one last strong attempt to get a stimulus deal," said Edward Moya, senior market analyst at Oanda in New York.

Boosting overall sentiment, drugmaker Pfizer Inc said on Friday it could have a coronavirus vaccine ready in the United States by the end of the year.

Asia's trade-exposed currencies held firm on Monday as data showed China's economic rebound from the pandemic accelerated in the third quarter, with the yuan surging to a fresh 1-1/2-year high against the dollar.

China's gross domestic product grew 4.9% in July-September from a year earlier, slower than analysts' forecast, but faster than the second quarter and helped by strong gains in industrial output and an acceleration in retail sales. 

The Chinese currency touched 6.6737 against the U.S. dollar in the offshore market CNH=EBS , its strongest since March 2019, before edging back 0.35%.

The yuan has benefited in the last few months from hopes of a Joe Biden win in the U.S. presidential election, as he is seen as less of a threat to U.S.-China relations.

Lee Hardman, currency analyst at MUFG, said "the renminbi, other Asian and commodity-related currencies should continue to benefit," noting that the spread of COVID-19 in Asia remains more contained than in the rest of the world and that points to "a continuation of cyclical outperformance" there.

The Australian dollar was 0.35% higher at $0.7102 and the New Zealand dollar rose 0.53% to $0.6641.

New Zealand Prime Minister Jacinda Ardern won re-election on Saturday, delivering the biggest election victory for her center-left Labour Party in half a century.

Euro/dollar rose 0.55% to $1.1782, while dollar/yen dipped 0.03% to 105.38 .

Elsewhere, sterling rose 0.64% versus the dollar to $1.30.

(Reporting by John McCrank; additional reporting by Olga Cotaga Editing by Nick Zieminski) ((john.mccrank@thomsonreuters.com Twitter @jmccrank; 1 646 223-6643; Reuters Messaging: john.mccrank.thomsonreuters.com@reuters.net))

More From Currencies