US dollar hits lowest in more than six weeks

London

THE US dollar extended its losses on Wednesday, hitting its lowest in more than six weeks, after US President Donald Trump boosted hopes for a large fiscal stimulus package, prompting some traders to ramp up bets on riskier currencies.

Lawmakers in Washington have been negotiating intermittently since August, with Democrats arguing for a bigger package to help manage the economic fallout from coronavirus.

Mr Trump raised hopes for a breakthrough on Tuesday by saying he was willing to accept a large aid bill, despite opposition from his own Republican party.

The US dollar fell in response to the comments, even though markets generally expect more fiscal stimulus to be passed in the near future regardless of whether it is agreed before the election.

At 7.02pm on Wednesday, Singapore time, the US dollar was down 0.3 per cent against a basket of currencies, at 92.733, having hit a low of 92.685 earlier in the session.

Thu Lan Nguyen, FX and EM analyst at Commerzbank, said that the day's currency market moves were not typical "risk-off" moves, as the safe-haven Japanese yen was up around 0.5 per cent against the US dollar at 104.845, close to one-month highs.

Rather, the hopes for fiscal stimulus caused US dollar weakness because it boosted long-term inflation expectations for the United States, she said.

The riskier New Zealand and Australian dollars both advanced, with the Kiwi up 0.8 per cent and the Aussie up 0.6 per cent versus the US dollar by 7.07pm, Singapore time.

The Norwegian crown reached a one-week high of 9.19625 versus the US dollar, and the Canadian dollar rose to its strongest in more than six weeks, touching 1.3081 per US dollar.

The euro rose to a one-month high versus the US dollar in early trading and was up 0.3 per cent at US$1.18575.

China's yuan surged, in both offshore and onshore trading, led by firmer central bank guidance and recent data suggesting a more sustained recovery in the world's second-largest economy.

The offshore yuan reached its strongest in two years versus the US dollar towards the end of the Asian session at 6.6278 before easing somewhat.

Elsewhere, sterling jumped to as high as US$1.3071 after the European Union's chief negotiator said that a Brexit deal with Britain was "within reach". REUTERS