US$ hovers near 2-month high amid economic, political risks

London

THE dollar hovered near a two-month peak against a basket of currencies on Monday as doubts about economic recovery persisted before a barrage of economic data and political developments in the United States.

A rebound in US stocks on Friday has helped curb the ascent of the dollar, considered a safe haven, but signs of slowdown in the nascent recovery from the pandemic and political uncertainties have kept investors on guard. The dollar index slipped to 94.21. It reached a two-month high of 94.745 last week and posted its biggest weekly rise since early April.

Against the yen, the dollar was more subdued at 105.36 yen.

The pound jumped to US$1.2896 on hopes that Britain could secure a Brexit trade deal with the EU.

The euro rose 0.3 per cent to US$1.1661 after dropping to US$1.16125 on Friday, its lowest in two months.

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Data on US currency futures positions released on Friday also pointed to further upside potential for the dollar, with speculators holding a big net short position in the currency which they could move to cover if the greenback moves higher.

US Commodity Futures Trading Commission data showed speculators held a net short position of US$33.989 billion, up from US$31.524 billion the week before and near the highest level in almost 10 years. The flip side of that was a large net long position in the euro, which showed a slight increase last week to US$27.922 billion.

"We think euro/dollar should find good long-term demand below the 1.1600 area, but really require some better news on the global recovery - effective lockdowns, vaccines, new stimulus - before the euro/dollar rally fully resumes," ING said in a note to clients.

Investors are now looking to the first US presidential debate on Tuesday.

"Few people will be trying to bet on the election outcome. At least they will wait until tomorrow's TV debate," said Kyosuke Suzuki, director of forex at Societe Generale.

The New York Times reported on Sunday that President Donald Trump paid little in income taxes in recent years, claiming heavy losses from his business enterprises that offset hundreds of millions of dollars in income.

Meanwhile, worries are growing that the economic recovery in the US is slowing as many government stimulus programmes have expired, curbing consumer spending.

The week provides markets with more data on the health of the world's biggest economy, including consumer confidence which is expected to be released on Tuesday, a manufacturing survey and consumer data on Thursday and jobs data on Friday. REUTERS