Dollar slides as U.S. stocks rally, but sentiment cautious

NEW YORK (Reuters) – The dollar fell on Wednesday, tempering its safe-haven appeal for now, as U.S. stocks rallied, although sentiment remained cautious amid a resurgence of new coronavirus cases globally, particularly in the United States.

Demand for the U.S. currency proved remarkably stable as oil prices steadied while European bourses traded in negative territory.

“The buck tends to struggle when Wall Street rallies,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

He added that currencies have largely consolidated given the “the back and forth of optimism over the economic outlook.”

The dollar is typically seen as a safe haven for investors to park their cash each time a resurgence of the pandemic seems to threaten a global economic recovery.

Against a basket of its rivals, the dollar index dropped 0.5% to 96.527.

The euro EUR=EBS rose 0.6% versus the dollar to $1.1337 marginally, while a recent fall in selling positions against the greenback provided room for possible further drops.

Commodity currencies, which tend to thrive in times of increased risk appetite, also gained against the dollar.

The Australian dollar rose 0.4% against the greenback to US$0.6971 AUD=D3. The New Zealand dollar NZD=D3 grew 0.2% to US$0.6566, with the Canadian dollar CAD=D3 rising 0.5% to C$1.3543 per U.S. dollar.

“I think in the absence of any pro-growth news, the virus count will be the one statistic that pops out from everyone’s screens”, said Marshall Gittler, head of investment research at BDSwiss, noting that while it may seem counterintuitive, rising U.S. cases often encourage investors to buy the dollar.

Against the safe-haven yen, the dollar was slightly down on the day at 107.44 yen JPY=EBS. The greenback was also 0.5% lower versus the Swiss franc at 0.9382 CHF=EBS.

Sterling GBP=D3 shrugged off earlier losses and rose 0.4% to $1.2588, after British finance minister Rishi Sunak promised 30 billion pounds ($37.7 billion) to head off an unemployment crisis by paying companies to bring back furloughed workers and cutting taxes for hospitality firms and homebuyers.Earlier, the onshore yuan CNY=CFXS was stable at 7.0129, halting a two-day rally, after the Chinese central bank’s daily midpoint for the currency was set at a weaker than expected level. Other Asian currencies straddled narrow ranges as a resurgence of coronavirus cases threatened a return of lockdown restrictions, leaving investors fretting about the mounting economic costs of the pandemic.

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