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Dollar drops as investors focus on probability of coming US Covid-19 relief

New York

THE US dollar dropped as investors focused on the probability of forthcoming US novel coronavirus relief.

Wrangling in Washington over pandemic aid has dominated global markets last week, and although US House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin failed to hammer out a deal, talks will continue despite Republican doubts.

Mr Trump said in an interview on Friday that he wants to see a bigger stimulus package than either Democrats or Republicans were offering, a reversal from his threats at the beginning of the week that he would halt negotiations.

"We're in one of those periods where Washington is driving Wall Street, be it either the presidential election or fiscal stimulus, and today it was about the stimulus," said David Carter, chief investment officer at Lenox Wealth Advisors in New York.

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"Markets are up on the hope that more fiscal stimulus is coming but it's really just hope, as communication from Washington has become somewhat erratic," he added.

Reuters/Ipsos polls show Mr Trump's approval rating plummeting, with Americans steadily losing confidence in his handling of the pandemic, while Democratic challenger Joe Biden makes gains in several key swing states.

"Biden is rising in the polls, creating both hope that fiscal stimulus is coming and less of a chance of a contested election which could be a real problem for markets," Mr Carter said.

Next week, investors' attention will shift to the reporting season, and analysts now see third-quarter S&P 500 earnings, in aggregate, falling by 21 per cent year-on-year, according to Refinitiv.

Yields on Treasury bonds ticked higher in afternoon trading on Friday amid improving risk appetite.

Benchmark 10-year notes last fell 2/32 in price to yield 0.772 per cent, from 0.767 per cent late on Thursday.

The dollar dropped against a basket of world currencies on fiscal relief optimism and the growing likelihood of a Biden victory. The dollar index fell 0.58 per cent, with the euro up 0.54 per cent to US$1.1821.

The Japanese yen strengthened 0.40 per cent versus the greenback at 105.63 per dollar, while sterling was last trading at US$1.304, up 0.83 per cent on the day. REUTERS

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