U.S dollar stays firm, Joe Biden to unveil COVID-19 support programs

The U.S dollar was up on Thursday morning in Asia, continuing a rebound from near three-year lows against major peers, as investors await U.S. President-elect, Joe Biden’s plans for further stimulus measures.

As at press time, the U.S. Dollar Index which tracks the greenback against a basket of major currencies inched up 0.05% to 90.4020.

The U.S President-elect, Joe Biden, is scheduled to reveal his plans for “trillions” of dollars in further COVID-19 stimulus programs shortly.

Currency traders are betting that such measures will lead to faster economic recovery aid U.S. Treasury yields, in turn, giving the U.S dollar the long-needed support.

Quick fact: The U.S. Dollar Index tracks the American dollar against a basket of other major currencies (like the Japanese yen, British pound sterling, Swedish Krona, and Euro). Individuals hoping to meet foreign exchange payment obligations via dollar transactions to countries in Europe, and Japan, would need to pay fewer dollars in meeting such obligations.

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Bigwig FX, spoke on the macros that could weigh on the safe-haven currency in the near term:

“The US dollar has stabilized after weakness that was prompted by some unsurprising pushback on tapering by US Federal Reserve speakers.

“And while the FED is unlikely to taper before H2 ore even 2022, the “Taper Talk Genie” out of the bottle, and the magical spirit will linger over price action for months to come as well as prominently feature in the Fed debate this year, as inflation should make a strong comeback – at least temporarily.

“In the meantime, there will be more than enough US data disappointments to keep dollar bulls nose ring to pen. At the same time, Fed Chair Powell will probably also sound very cautious tonight (US time) and dismiss any reducing stimulus notion.

“Despite US yields falling after well-received US bond auctions, some EURO weakness continues to linger in the market. Moves earlier in the week were a broad US dollar short trade getting stopped out, but that appears to have run its course.”

What to expect: It looks like a more general Euro weakness is setting in amid dovish comments from the President of the European Central Bank (ECB), Christine Lagarde. The ECB seems to be more attentive to the FX impact on inflation and very carefully monitoring exchange rates.


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