Euro Reaches Three Month High as Dollar Takes a Hit
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The euro clocked a three-month high against the US dollar, as riskier currencies got a boost because of strengthening recovery in China and elsewhere and expectations of additional monetary stimulus from the United States. The New Zealand dollar was one of the currencies to watch, as the currency was on track for reaching its highest value since June 2018. Investors seem to be shorting dollars because of optimism over-promising COVID-19 vaccine trials has driven purchase of riskier currencies and other high-yielding assets higher outside of the United States. The dollar has not received much support because of the increase in coronavirus cases in the country.
Moreover, there is increasing speculation that the Federal Reserve will step in for supporting the economy during a touch winter before the coronavirus vaccine is rolled out. A meeting of the Fed is scheduled for December 15th to December 16th. Before then, Jerome Powell, the Chair of the Federal Reserve, will be making an appearance in front of Congress on Tuesday and Wednesday, and investors will be watching his remarks closely for any clues regarding their next move. Powell, along with Steve Mnuchin, the Treasury Secretary, will be testifying on the CARES Act, under which $2 trillion had been granted to the Treasury by the Congress as coronavirus aid.
A large portion of this aid had been used for supporting the lending programs of the FOMC. The said programs had been cut off by Mnuchin less than two weeks ago and he requested that the Fed return the funds that were unused. An extension had also been declined. Market analyst said that keeping all of this in mind, it would certainly be interesting to see what they have to say about the matter. Investors will also be watching to see if Powell gives any hints of stimulating the US economy through a monetary policy.
The analysts said that since the US government had not come to an agreement over a new fiscal package, it is more likely that the Fed will take some action in December. If this were to happen, then safe-haven assets like the US dollar would once again be under pressure. There was a 0.4% jump in the Euro/dollar pair, as it reached $1.1968, which was quite close to its highest on September 1st. The index keeping track of the dollar against a basket of other currencies had declined by 0.2% to reach 91.74.
The Norwegian crown made the biggest moves in the developed world, which jumped by 0.5% against the US dollar and was trading at 8.8435. The Swedish crown had also climbed by 0.4% to reach 8.5355. Both currencies also rose against the euro, but by a smaller extent. There was a 0.5% jump in the British pound against the US dollar, as it reached a three-month high. It was last higher by 0.4% on the day while the Australian dollar had increased by 0.2%. The New Zealand dollar was also quite close to breaking a high of more than two years.
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