Safe-haven US$ up as Covid-19 surges, US stimulus hope fades

London

THE dollar gained on Monday, as surging Covid-19 cases in Europe and the United States and a lack of progress on a US stimulus package made traders turn to the safe-haven currency.

US House Speaker Nancy Pelosi said on Sunday that she expected a White House response on Monday to the latest stimulus plan, but there is little evidence that a deal is close.

The US has recorded its highest number of new Covid-19 cases for two consecutive days and so has France. Spain announced a new state of emergency and Italy has ordered restaurants and bars to shut by 6 pm.

Media reports that the Oxford/AstraZeneca vaccine has proved successful in elderly people and that staff at a major British hospital were told to prepare for it as early as next month were not enough to bolster sentiment.

But Stephen Innes, chief global market strategist at broker Axi, said the news may have prevented a deeper sell-off. "Fortunately, there are several vaccines in the pipeline, or we could have been looking at a pretty significant market reset this morning with Covid-19 flash points flaring up in virtually every corner of the globe this weekend," he said.

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An index tracking the US dollar against a basket of currencies was last up 0.1 per cent at 92.92.

Euro/dollar - the most traded currency pair and part of the index - fell 0.3 per cent at 1.1826.

It has slipped earlier by half a per cent after the German Ifo business climate index fell for the first time in six months in October.

The dollar also rose 0.1 per cent against the Japanese yen at 104.85.

"What will drive the US dollar this week is the ultimate trend in equities and the steepness of the US Treasury two-year and 10-year curve," said Stephen Gallo, currency analyst at BMO Capital Markets.

"Firmer equities yield a steeper curve, which yields a weaker dollar."

US 10-year Treasury yields fell to their lowest since Wednesday.

The Chinese yuan was down 0.5 per cent against the US dollar at 6.6982 in the offshore market - a one-week low - in a sign of caution as the Chinese government began discussions on its next five-year plan.

Some other losers included the Norwegian kroner and the Australian dollar, as they retreated from last week's gains driven by traders taking on more risk.

Both fell in early European trading, but rebounded slightly afterwards.

The Aussie dollar was last flat at 0.7138. The kroner was down 0.2 per cent at 9.2520 against the dollar, having seen nearly one per cent drop earlier and stabilised against the euro at 10.9410.

Elsewhere, the British pound recovered the lost ground, rising by 0.1 per cent to US$1.3057 and by 0.4 per cent against the euro to 90.56 pence. REUTERS