Left Menu
Development News Edition

FOREX-Dollar bogged down as investors turn to Congress for stimulus

The dollar was mired at a more than two-year low on Thursday, as investors grew increasingly worried about the economic drag of surging coronavirus cases in the United States, and looked to a fiscal rescue package stalled in Congress for another stimulus hit. Overnight, the Federal Reserve kept pressure on the currency by leaving the door open to further easing, while calling out the economic toll from the latest wave of new infections.

Reuters | Updated: 30-07-2020 10:25 IST | Created: 30-07-2020 10:15 IST
FOREX-Dollar bogged down as investors turn to Congress for stimulus
Representative image Image Credit: ANI

The dollar was mired at a more than two-year low on Thursday, as investors grew increasingly worried about the economic drag of surging coronavirus cases in the United States, and looked to a fiscal rescue package stalled in Congress for another stimulus hit.

Overnight, the Federal Reserve kept pressure on the currency by leaving the door open to further easing, while calling out the economic toll from the latest wave of new infections. Against a basket of currencies the dollar was pinned close to its lowest since mid-2018 at 93.344, while Antipodean currencies were poised near multi-month peaks.

Against the euro, the dollar was just above a 22-month low of $1.1807 touched overnight. The greenback is set for its worst month in a decade on the common currency as the recovery outlook in Europe brightens just as it darkens in the United States. The U.S. epidemic has intensified since June. California, Texas and Florida all posted one-day records for fatalities on Wednesday.

Fed Chair Jerome Powell said the new wave of cases were harming the recovery and indicated more fiscal support would help when asked what more could be done. "Fiscal policy is essential here," he said. "Very likely, more will be needed from all of us. I see Congress negotiating now over a new package, and I think that's a good thing."

However, those negotiations are at an impasse as a Friday deadline for extending a $600-per-week unemployment benefit looms. Democrats are resisting a stop-gap extension in favour of pressing for passage of a comprehensive bill.

"Concerns around rising virus cases and their impact on the labour market and activity will be further compounded if Congress cannot agree," said Seema Shah, chief strategist at Principal Global Investors in London. "The recovery is at stake."

The safe haven yen sat at 105.07 per dollar, having hit a four-and-a-half-month high of 104.77 on Wednesday. The dollar has lost 4.6% of its value against the euro and 2.7% against the yen in July and slid 7% against a basket of currencies since mid May.

DOLLAR DECLINE The dollar has been tumbling as investors see the virus raging in the United States and begin to doubt the conventional wisdom that U.S. growth and investment returns in dollars can best most other countries.

Advance quarterly GDP data due at 1230 GMT will likely be one for the record books, with economists anticipating a 34% drop in annualised economic output last quarter. Employment data is also due and further weakness will likely fuel speculation that the Fed might - perhaps at its next meeting in September - loosen its approach to inflation.

"One possible outcome could be adoption of an average inflation target, which would see rates lower for longer, in order to generate an overshoot down the track," ANZ analysts said in a note. Elsewhere growing nervousness about global tensions with China dragged on risk sentiment. The Australian dollar was 0.1% softer at $0.7178 and the kiwi slipped 0.3% to $0.6646.

Sino-U.S. relations have deteriorated sharply over issues ranging from the pandemic to Beijing's territorial claims in the South China Sea and its clampdown on Hong Kong. That has weighed on the yuan, which has been all but left behind as the dollar has slumped, and was steady on Thursday at 6.9965 per dollar onshore.

China is also lagging behind agricultural purchases promised under January's trade deal. Elsewhere, the Turkish lira hovered at a 2-1/2 month low against the dollar and a record low versus the euro , on rising concerns over depleted reserves and local demand for dollars despite state efforts to stabilise trading.


TRENDING

OPINION / BLOG / INTERVIEW

Post-COVID-19 Nigeria needs a robust Health Management Information System to handle high disease burden

Nigeria is among a few countries that conceptualised a health management information system HMIS in the early 90s but implementation has been a challenge till date. Besides COVID-19, the country has a huge burden of communicable and non-com...

Morocco COVID-19 response: A fragile health system and the deteriorating situation

Learning from its European neighbors, Morocco imposed drastic measures from the initial stages of the COVID-19 outbreak to try to contain its spread. The strategy worked for a few months but the cases have surged after mid-June. In this sit...

COVID-19: Argentina’s health system inefficiencies exaggerate flaws of health information system

You can recover from a drop in the GDP, but you cant recover from death, was the straightforward mindset of Argentinas President Alberto Fernndez and defined the countrys response to COVID-19. The South American nation imposed a strict...

Rwanda’s COVID-19 response commendable but health information system needs improvement

Rwanda is consistently working to improve its health information system from many years. However, it is primarily dependent on the collection and reporting of health data on a monthly basis. Besides, evaluation studies on Rwandas HIS publis...

Videos

Latest News

SP delegation calls on UP Guv, accuses govt pursuing vendetta politics

A Samajwadi Party delegation on Friday met Uttar Pradesh Governor Anandiben Patel and sought her intervention to check the alleged harassment of opposition leaders by the BJP-led state government due to political vendetta. It also brought t...

'Festive season to push auto sales but disproportionate billings may lead to stress for dealers'

Although festive season demand may provide some temporary relief to the auto industry in the next two-three months, the continued disproportionate wholesale billings by original equipment manufacturers could lead to increased stress for dea...

Study group for women stuck in 'debt labyrinth': Maha minister

The Maharashtra government has formed a study group to suggest ways to help women stuck in a debt labyrinth of micro finance companies in rural areas and resolve their economic issues, Minister Hasan Mushrif said on Friday. The state-level ...

UPDATE 2-Israel returns to lockdown as COVID-19 cases mount

Israel entered a second nationwide lockdown on Friday at the onset of the Jewish high-holiday season, forcing residents to stay mostly at home amid a resurgence in new coronavirus cases. A lockdown was imposed in late March and eased in May...

Give Feedback