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FOREX-U.S. stimulus impasse takes steam out of dollar rebound

Published 08/12/2020, 04:58 PM
Updated 08/12/2020, 05:00 PM
© Reuters.
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* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Iain Withers
LONDON, Aug 12 (Reuters) - The dollar struggled to hold
recent gains on Wednesday as political wrangling over a stimulus
package for the U.S. economy halted its recent rebound.
Investors are watching for any signs that a political
impasse in Washington over a further rescue package for the
pandemic-hit economy can be overcome. The dollar, which has held above a two-year low hit on
Thursday of 92.495, was down nearly 0.1% against a basket of
currencies at 93.643 =USD , after shedding gains made in Asian
trading.
"If there is no movement in the negotiations soon, the Fed's
concerns are quite likely to have an impact on the dollar sooner
or later," FX analysts at Commerzbank said in a note.
U.S. inflation figures due at 1230 GMT are expected to show
consumer price growth drift down to 1.1% on a year-on-year
basis, from 1.2% in June.
The dollar continued to make gains against the yen
JPY=EBS , with the Japanese currency down nearly 0.3%, after
slumping to 106.825 earlier, its lowest since July 24.
Improved U.S. debt yields have pressured the yen by luring
investment from zero-yielding Japan.
Sterling GBP=D3 was flat, despite data showing the UK
economy had entered a deep recession, as signs of a recovery in
June provided some support for the currency.
The New Zealand dollar NZD=D3 fell 0.6% to $0.6541, after
the country's central bank held rates but surprised markets by
extending its bond buying programme and putting a little more
emphasis on the possibility of negative rates. "Taken together, that's why interest rates have fallen a few
basis points and why the kiwi fell," said Westpac FX analyst
Imre Speizer. "That's a modest dovish reaction."

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