Euro near three-month high as US dollar takes a hit

London

THE euro was close to a three-month high on Tuesday as the US dollar fell on expectations of more monetary stimulus from the United States and a strengthening recovery elsewhere pushed up riskier currencies.

One of the currencies to watch was the New Zealand dollar, which was on course to reach its highest since June 2018.

Bitcoin reached a record high of US$19,918. Traders were watching for the next hurdle of US$20,000 for the cryptocurrency.

Investors are short dollars as optimism about promising vaccine trials drives buying of riskier currencies and higher-yielding assets outside the United States.

Worries about rising coronavirus cases have not provided the dollar with much support. Speculation is growing that the Federal Reserve will act to support the economy through a tough winter before vaccinations become available.

The Fed meets to set policy on Dec 15 and 16. Before then - on Tuesday and Wednesday - Fed chair Jerome Powell will appear before Congress, and his remarks will be closely watched for any clues as to the Fed's next moves.

Mr Powell and Treasury Secretary Steven Mnuchin will testify on the CARES Act, under which Congress made US$2 trillion available to the Treasury as coronavirus aid, a large portion of which was aimed to support the FOMC's lending programmes. Less than two weeks ago, Mr Mnuchin cut off the programmes, requesting that the Fed return unused funds and declined any extension.

"With all that in mind, it will be interesting to see what the two officials have to say on the matter, and whether Powell will hint at other ways in stimulating the US economy from a monetary policy front," said Charalambos Pissouros, senior market analyst at JFD Group.

"The US government has yet to agree with Congress on a new fiscal package, something that makes the case for the Fed to act in December more likely," Mr Pissouros said. If that happens, "the US dollar and other safe havens could come under selling pressure." Euro/dollar was up 0.3 per cent at US$1.1964, close to US$1.2004, its highest since Sept 1.

An index that tracks the dollar against a basket of currencies was down 0.2 per cent at 91.79 .

"The euro won't go up fast," said Kit Juckes, macro strategist at Societe Generale. "It will only do so as the dollar falls more broadly." REUTERS