March 24, 2023

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On Wednesday, the dollar fell to its lowest level in Asian trading in more than two years and there was a surge in riskier currencies, as investors opted to look past yet another delay in the US fiscal stimulus approval and bet that there would be an increase in global risk market appetite in 2021. On Tuesday, Mitch McConnell, the US Senate Majority Leader blocked a vote on increasing the coronavirus relief payments from $600 to $2,000, which added another delay to the already long negotiations over an aid package. However, market sentiment remained upbeat, as investors were highly optimistic that they would eventually reach a fiscal stimulus deal, which reduced demand for the safe-haven dollar.

Market analysts said that this latest setback didn’t really make a difference for investors because they have been over the moon and back because of news that there is still enough fiscal support available for the US economy. It is expected that the dollar will fall even further in the next year, as President-elect Joe Biden is expected to introduce additional measures for supporting the economy when he finally takes office next year. On Wednesday in the Asian trading session, there was a peak in the ‘risk on’ movements in the currency markets, but they eased off at the opening of the European markets.

The dollar had declined by 0.1% at 0816 GMT as compared to a basket of other major currencies, as it reached a value of 89.895. It had reduced to 89.711 overnight, while the euro had climbed to $1.226. Considered as an indicator of risk appetite, the Australian dollar had increased by 0.6% at 0825 GMT at 0.76475. The New Zealand dollar had also managed to reach its highest levels in two years. As opposed to the Japanese yen, the greenback had lost out a bit, as there was a 0.2% drop at 0834 GMT in dollar-yen as it reached 103.34. 

Sentiment got a boost in Europe, as Britain became the first country to grant approval to the COVID-19 vaccine that was jointly developed by AstraZeneca and Oxford University. The British pound had also reached $1.3538 against the US dollar, but it was little modified against the euro, while traders coming back from the Christmas break were digesting the Brexit trade deal that was made on December 24th. While this agreement did help in avoiding a chaotic Brexit without a trade deal, but it should be noted that it doesn’t cover services that makeup around 80% of the economy in Britain.

Therefore, currency analysts said that since the deal has not come up with an equivalence framework for financial support and there was also increasing support for the independence of Scotland, it would mean new headwinds for the pound. There was also an increase in eurozone government bond yields by just one basis point, with 10-year German benchmark yields at -0.56%. Elsewhere, Bitcoin had surged to reach a new all-time high of $28,599.99, which took its yearly gain past 295%.

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