WASHINGTON: The dollar index slipped on Monday and riskier currencies gained, as financial markets waited for news about US President Donald Trump’s health and developments in fiscal aid talks in Washington.
Trump said on Friday he had tested positive for COVID-19, triggering investor flight to safer assets and a stock market sell-off, as the news added an extra layer of uncertainty to the Nov. 3 presidential elections.
The Australian dollar — a liquid proxy for risk — was up and the safe Japanese yen was down, suggesting an improvement in risk appetite, but the moves in the dollar were less clear-cut because there is no consensus on how the US election’s outcome would affect the dollar.
“The jury is out. There isn’t a clear consensus on how the dollar should trade on this degree of political uncertainty in the US,” said Jane Foley, senior FX strategist at Rabobank.Financial markets wait for news about US president’s health updates and developments in fiscal aid talks
The dollar slipped against a basket of currencies, and was down 0.2 percent.
The dollar rose 0.3 percent against the yen to 105.66. Dollar-yen saw its sharpest fall in more than a month on Friday .
“FX traders cannot agree on how to interpret the recent news flow,” Ulrich Leuchtmann, Commerzbank’s head of FX and commodity strategy, said.
“The biggest issue for the FX market is: It is uncertain
whether this has made the biggest risk of the US elections — a long political and legal battle about the result — any more or less likely,” he said.
“A battle of this nature is only likely if the contender Joe Biden wins,” he added. “That might have become more likely.”
Trump’s illness has not led to an outpouring of support for him beyond his core group of followers, as a majority of Americans think he could have avoided the infection if he had taken the virus more seriously, a Reuters/Ipsos poll showed. Goldman Sachs analysts said in a note to clients they were holding off on recommending more dollar short positions, as they wait for more information about how Trump’s health will affect the election.
HIGHLIGHTS
• The Australian dollar — a liquid proxy for risk — was up and the safe Japanese yen was down, suggesting an improvement in risk appetite.
• Goldman Sachs advised clients to buy sterling, as it says that a ‘thin’ trade deal is likely to be struck between Britain and the European Union by early November.
Investors are waiting for developments in talks in Washington about a coronavirus relief package after US House Speaker Nancy Pelosi on Sunday reported progress in the discussions.
Rabobank’s Foley said that if progress is made on the coronavirus relief funds then that would provide a more clear-cut boost to markets’ risk appetite.
The Australian dollar was up 0.3 percent at 0.71815, while the New Zealand dollar was flat on the day at 0.6647.
The Reserve Bank of Australia’s policy meeting and the Australian budget announcement are on Tuesday.
Coronavirus restrictions in Auckland will be lifted this week, New Zealand Prime Minister Jacinda Ardern said. The euro was up 0.3 percent at $1.1755.
The safe haven Swiss franc rose to a 13-day high versus the dollar, lifted by Japanese tech firm NEC saying it will buy Swiss financial software company Avaloq Group AG. Euro-Swiss was down 0.1 percent at 1.0773. The pound was a touch below $1.30, down 0.1 percent on the day.
Goldman Sachs is advising clients to buy sterling, as it says that a “thin” trade deal is likely to be struck between Britain and the European Union by early November.
