Election jitters keep US dollar in tight range

London

THE US dollar index slipped on Monday and riskier currencies gained, as financial markets waited for news on US President Donald Trump's health and developments in fiscal aid talks in Washington.

Mr Trump said on Friday he had tested positive for Covid-19, triggering investor flight to safer assets and a stock market sell-off, as the news added an extra layer of uncertainty to the Nov 3 presidential elections. But early during the Asian session, the president made a surprise appearance in a motorcade outside the hospital where he is being treated, which helped improve risk appetite. He could be discharged from the hospital today, said his doctors.

The Australian dollar - a liquid proxy for risk - was up and the safe Japanese yen was down, suggesting an improvement in risk appetite, but the moves in the US dollar were less clear-cut. "The jury is out. There isn't a clear consensus on how the dollar should trade on this degree of political uncertainty in the US," said Jane Foley, senior FX strategist at Rabobank.

The greenback slipped against a basket of currencies, and was down 0.2 per cent on the day at 93.658 at 1040 GMT.

The US dollar rose 0.3 per cent against the yen to 105.66 at 1042 GMT. US dollar-yen saw its sharpest fall in more than a month on Friday .

"FX traders cannot agree on how to interpret the recent news flow," Ulrich Leuchtmann, Commerzbank's head of FX and commodity strategy, said. "The biggest issue for the FX market is: it is uncertain whether this has made the biggest risk of the US elections - a long political and legal battle about the result - any more or less likely," he said.

Mr Trump's illness has not led to an outpouring of support for him beyond his core group of followers, as a majority of Americans think he could have avoided the infection if he had taken the virus more seriously, a Reuters/Ipsos poll showed. Goldman Sachs analysts said in a note to clients they were holding off on recommending more US dollar short positions, as they wait for more information about how Mr Trump's health will affect the election.

Investors are waiting for developments in talks in Washington about a Covid-19 relief package after US House Speaker Nancy Pelosi on Sunday reported progress in the discussions. Rabobank's Ms Foley said that if progress is made on the Covid-19 relief funds, that would provide a more clear-cut boost to markets' risk appetite. REUTERS