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COMMENTARY

US dollar holds on to gains; euro hits nine-day low

London

THE US dollar index held its recent gains on Wednesday and the euro touched a nine-day low, as global equity markets remained cautious in light of diminishing hopes for a Covid-19 vaccine or US fiscal stimulus.

The rally in global equities started to run out of steam on Tuesday and risk appetite suffered, with the dollar index seeing its biggest daily jump in three weeks.

Johnson & Johnson said it was pausing a clinical trial of a coronavirus vaccine and Eli Lilly and Co also said it had paused a clinical trial of an antibody treatment. British drugmaker AstaZeneca's US trial for a vaccine has been on hold for over a month.

Most major currency pairs saw only small moves on Wednesday.

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The British pound was the biggest mover in early London trading, falling as low as US$1.2865, as hopes dimmed for a Brexit agreement, before recovering to US$1.2950.

The dollar index was at 93.554 at 6.45pm Wednesday, Singapore time, flat on the day, having briefly risen and exceeded the previous session's high of 93.599.

Eurozone industrial production data showed the rate of recovery slowed sharply in August, in line with expectations.

At 6.45pm, Singapore time, euro-US dollar was down 0.1 per cent on the day, at 1.17360.

Kit Juckes, head of FX strategy at Societe Generale, said that the market was characterised by "ennui" and "angst", in the absence of a clear driver before the US elections.

But markets still expect that a victory for Democrat Joe Biden in the US presidential elections will result in more fiscal stimulus.

"The assumption of Biden legislating a large fiscal stimulus package will continue to limit fallout in the markets from the lack of near-term fiscal stimulus," wrote MUFG strategist Derek Halpenny.

The yen and Swiss franc both rose around 0.1 per cent versus the US dollar.

But there were still some signs of risk appetite, as the Australian and New Zealand dollars edged up.

The Australian dollar was up 0.1 per cent on the day at 0.71690 versus the US dollar, and the New Zealand dollar rose 0.3 per cent to 0.6663.

The Norwegian crown was up around 0.2 per cent against the US dollar, at 9.234.

The International Monetary Fund gave a slightly improved forecast for the hit to global growth in 2020, but lowered their forecasts for many emerging markets. REUTERS

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