US dollar, yen nurse losses amid 'risk-on' mood

London

THE US dollar and safe-haven Japanese yen nursed losses on Thursday, after revived hopes for US fiscal stimulus improved investor sentiment, while the prospect of negative interest rates knocked the New Zealand dollar lower.

US President Donald Trump and House Speaker Nancy Pelosi seem open to pursuing a stimulus package for the airline industry, even though Mr Trump halted talks with Democrats for a bigger plan.

Investors also expect that Joe Biden, if elected, would quickly spend money to stimulate growth. That mood lifted equity markets and sunk the yen to a three-week low of 106.11.

The US dollar struggled to recoup losses against other majors, excluding the kiwi. Against a basket of currencies, the greenback was down 0.1 per cent on the day.

The euro edged up to US$1.1782. The risk-sensitive Australian dollar rose 0.3 per cent to US$0.7163.

"Overall, investors seem to be focusing more on the increasing odds of a Biden win and what that might imply for a stimulus package after the election," said Marshall Gittler, head of investment research at BDSwiss.

"With that eventuality in mind, Trump's decision to stop negotiations now is ultimately a risk-on move, as it increases the likelihood of a decisive Biden win."

The New Zealand dollar dropped as much as 0.5 per cent after central bank officials again hinted that negative interest rates are possible. It recovered in early deals in London to trade 0.2 per cent higher to the US dollar on the day.

Money-market pricing of an April 2021 rate cut increased after the remarks.

"Overall, we think policy support will remain strong globally as economies continue to recover from Covid-19-related disruptions," said UBS Global Wealth Management's chief investment officer Mark Haefele.

He added: "In the US, even if a pre-election deal cannot be reached we think a substantial stimulus deal will eventually be agreed on, helping to set the stage for the next leg of the equity market rally."

Minutes of the US Federal Reserve's September meeting, released on Wednesday, hinted at more easing.

Many participants had assumed the economy would be supported by fiscal spending, and some were open to further debate about the Fed's bond- buying programme. REUTERS