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FOREX-Dollar gets global beating as stimulus, Brexit boost risk appetite

Published 12/17/2020, 08:21 PM
Updated 12/17/2020, 08:30 PM
© Reuters.
GBP/USD
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AUD/USD
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(Adds central bank policy decisions from Switzerland, UK and
Norway)
* Pound hits 2.5 year high on Brexit outlook
* BoE leaves rates unchanged
* Swiss National Bank sticks to policy despite U.S.
criticism
* Norway's crown rises after c-bank rate decision
* Bitcoin rises to record high above $23,000
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Julien Ponthus
LONDON, Dec 17 (Reuters) - The dollar fell to its lowest in
over two years against major currencies on Thursday after the
Federal Reserve stuck to its current policy guns while hopes for
more U.S. stimulus and a post-Brexit trade deal boosted appetite
for riskier currencies.
Congressional negotiators were closing in on a $900 billion
COVID-19 aid bill in the United States, according to lawmakers
and aides, boosting stock markets across the globe. The dollar index =USD continued to retreat during morning
trading in Europe, falling at one point to a new low of 89.867
against a basket of currencies after breaking below 90 for the
first time since April 2018.
"While we expect stocks to benefit further from positive
news on vaccine rollouts and U.S. fiscal support, the same
cannot be said for the U.S. dollar", said Mark Haefele, chief
investment officer at UBS GWM.
"Safe-haven demand for the dollar is being eroded by a
broadening global recovery."
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.
Meanwhile, optimism the European Union and the UK will
finally reach a post-Brexit trade deal boosted the pound, which
rose to $1.3615 GBP= , its highest level since May 2018.
EU Brexit negotiator Michel Barnier reported "good progress"
in the talks but cautioned "last stumbling blocks" stood in the
way of sealing a new trade pact.
The pound didn't make any significant moves and kept trading
above $1.36 after the Bank of England kept its stimulus
programme unchanged as it awaited for the outcome of the Brexit
trade talks.
The euro traded as high as $1.2244 EUR=EBS , its highest
since April 2018, before giving up some of its gains.

BITCOIN CROSSES $23,000
The Swiss franc also gained against the dollar and hit a
six-year high of $0.8823 after the Swiss National Bank stuck to
its readiness to intervene in currency markets despite being
labelled a currency manipulator by the United States.
The U.S. Treasury said that through June 2020 both
Switzerland and Vietnam had intervened in currency markets to
prevent effective balance of payments adjustments. Analysts expect the SNB to remain undeterred by U.S.
pressure and plough ahead with currency purchases.
"An independent central bank should not have to justify its
monetary policy decision," said Karsten Junius, chief economist
at J.Safra Sarasin.
Norway's currency, the crown, also strengthened to a
17-month high against the dollar, up over 1% after the country's
central bank kept its policy interest rate at zero percent but
warned that a rate increase may come earlier than it had
expected. But it was not only European currencies which hammered the
greenback.
The Australian dollar touched 0.7639 U.S. cents AUD= , the
highest since June 2018 while the dollar slid to 103.04 yen
JPY=EBS , it's lowest level since March.
China's onshore yuan CNY=CFXS traded at 6.5333 per dollar
and its offshore counterpart CNH=EBS handed at 6.5124, both
close to mid-2018 highs.
Also, Bitcoin BTC=BTSP set yet again a new record high on
Thursday, rising briefly over $23,000 just a day after passing
the $20,000 milestone for the first time.

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