Euro cruises higher as US dollar skids again

London

THE US dollar languished near a 2½-year low on Tuesday, as investors were encouraged to take on more risk after US lawmakers pushed forward with an enhanced Covid-19 relief package.

The House of Representatives voted on Monday to more than triple stimulus payments to Americans to US$2,000 from US$600, sending the plan on to the Senate for a vote.

The euro and pound also strengthened as London reopened after its Christmas break. Traders were digesting the EU-UK Brexit trade agreement reached late last week and relieved a "no-deal" had been avoided.

Euro bulls pushed the single currency up to US$1.2235, also buoyed by talk of a EU-China trade pact. The pound was back above US$1.35, while the dollar index was down 0.3 per cent near the lows of April 2018.

"The (US) dollar is very heavy," said Bart Wakabayashi, Tokyo branch manager of State Street Bank and Trust. "And that will continue into next year."

Data released by the Commodity Futures Trading Commission on Monday showed traders increased bets against the greenback in the week ended Dec 21 to US$26.6 billion. That was the highest in three months, Reuters' calculations found.

Sterling long positions grew ahead of the trade deal, the figures also showed, though the next set of data will reveal whether speculators "sold the fact".

Sterling rose 0.2 per cent to US$1.3484 following a two-day dip. It was as high as US$1.3625 this month, a level unseen since May 2018, but investors have taken some profits since the Brexit trade deal was struck.

Nick Nelson, head of European Equity Strategy, said the firm's FX strategists were targeting GBP/USD US$1.44 by end-2021.

State Street's Mr Wakabayashi said, however, that "Nothing has really been agreed (between the EU and London) on financial markets, and that's a big negative for the UK."

Other currencies also rose. The Australian dollar rose 0.2 per cent to 75.927 US cents, while its New Zealand counterpart added 0.3 per cent to 71.19 US cents.

The Chinese yuan gained 0.2 per cent to 6.5192 per US dollar in the offshore market. It changed hands onshore at 6.5310 per US dollar while other heavyweight emerging market currencies, including the Korean won, Mexican peso and South African rand were also higher. REUTERS