Dollar gets global beating as stimulus, Brexit boost risk appetite

  • 12/17/2020
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(Reuters) - The dollar fell to its lowest in more than two years against major currencies on Thursday as U.S. lawmakers wrangled over stimulus details, while Bitcoin rose to a record high, amid surging interest from larger investors.Negotiations in the U.S. Congress over final details of a $900 billion COVID-19 aid bill could spill into the weekend, requiring another stopgap spending bill to avert a looming government shutdown, Republican Senate Majority Leader Mitch McConnell said on Thursday. “We’ve got a global reflation on the way,” said Axel Merk, president and chief investment officer at Merk Investments in Palo Alto, California, noting that investors are selling the dollar to buy other assets. “That’s been the theme we’ve had and, if anything, that’s been accelerating,” Merk said. The dollar index fell as low as 89.723 against a basket currencies on Thursday, breaking below 90 for the first time since April 2018, and was last down 0.50% at 89.795. As the dollar selloff continued, many investors placed their focus on Bitcoin, which jumped 10.5% to a record high of $23,777, taking its gains this year past 220%. Bitcoin was last up 5% at $22,414. The rally in the world’s highest-profile cryptocurrency is buoyed by demand from larger investors attracted to its potential for quick gains and perceived inflation-hedging qualities. Technology shares pushed the S&P 500 and the Nasdaq to record highs on Thursday as optimism grew over a coronavirus stimulus bill, helping markets look past signs of economic strain brought on by the COVID-19 pandemic. The U.S. on Thursday stood ready to ship 5.9 million doses of a new coronavirus vaccine that is on the cusp on winning regulatory approval, just as the nation suffered its highest daily COVID-19 death toll with 3,580 lives lost. The Federal Reserve on Wednesday said it would keep funnelling cash into financial markets until the U.S. economic recovery is secure. The promise of long-term help fell short of some investors’ hopes of an immediate move. The dollar index rose after the Fed’s announcement, but the respite was short-lived. In Europe, Sterling pared gains against the dollar after U.K. Prime Minister Boris Johnson cast doubts on the likelihood of a Brexit trade deal. Optimism earlier on Thursday that the European Union and the UK will finally reach a post-Brexit trade deal boosted the pound, which rose to $1.3625, its highest level since May 2018, but since gave back some of the gain. The pound was last up 0.50% on the day at $1.3578. Senior British minister Michael Gove earier had put the chances of securing a trade deal with the European Union at less than 50% on Thursday, striking a pessimistic tone that contrasted sharply with remarks by the EU’s chief negotiator suggesting there had been good progress. Britain completes its departure from the block in two weeks. The Bank of England, on Thursday, said it was ready to tolerate an inflation spike in the event of a no-deal Brexit in two weeks’ time, but kept its stimulus unchanged as Britain and the European Union enter the end game of their trade deal talks. The euro was last up 0.52% at $1.2266, its highest since April 2018. The dollar dipped 0.05% against the Swiss franc 0.8844. Norway’s currency, the crown, was last down -1.57% at 8.5620. The country’s central bank on Thursday kept its policy interest rate at zero percent but warned that a rate increase may come earlier than it had expected.

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