LONDON (Reuters) – The dollar gained on Monday, as surging coronavirus cases in Europe and the United States and a lack of progress on a U.S. stimulus package made traders turn to the safe-haven currency.
U.S. House Speaker Nancy Pelosi said on Sunday she expected a White House response on Monday to the latest stimulus plan, but there is little evidence a deal is close.
The United States has recorded its highest number of new COVID-19 cases for two consecutive days and so has France. Spain announced a new state of emergency and Italy has ordered restaurants and bars to shut by 6 p.m.
Media reports that the Oxford/AstraZeneca vaccine has proved successful in elderly people and that staff at a major British hospital were told to prepare for it as early as next month were not enough to bolster sentiment.
But Stephen Innes, chief global market strategist at broker Axi, said the news may have prevented a deeper sell-off.
“Fortunately, there are several vaccines in the pipeline, or we could have been looking at a pretty significant market reset this morning with COVID-19 flash points flaring up in virtually every corner of the globe this weekend,” he said.
An index tracking the U.S. dollar against a basket of currencies was last up 0.1% at 92.92 =USD.
Euro/dollar – the most traded currency pair and part of the index – fell 0.3% at 1.1826 EUR=EBS. It has slipped earlier by half a percent after the German Ifo business climate index fell for the first time in six months in October.
The dollar also rose 0.1% against the Japanese yen at 104.85 JPY=EBS.
Hedge funds remain short the U.S. dollar, the latest data from the Commodity Futures Trading Commission showed, though the number of shorting contracts declined in the last couple of weeks. NETUSDG10=
“What will drive the U.S. dollar this week is the ultimate trend in equities and the steepness of the U.S. Treasury two-year and 10-year curve,” said Stephen Gallo, currency analyst at BMO Capital Markets. “Firmer equities yield a steeper curve, which yields a weaker dollar.”
U.S. 10-year Treasury yields fell to their lowest since Wednesday US10YT=RR.
The Chinese yuan was down 0.5% against the U.S. dollar at 6.6982 in the offshore market CNH=EBS – a one-week low – in a sign of caution as the Chinese government began discussions on its next five-year plan.
Some other losers included the Norwegian crown and the Australian dollar, as they retreated from last week’s gains driven by traders taking on more risk. Both fell in early European trading, but rebounded slightly afterwards.
The Aussie dollar was last flat at 0.7138 AUD=D3. The crown was down 0.2% at 9.2520 against the dollar NOK=D3, having seen nearly 1% drop earlier and stabilised against the euro EURNOK=D3 at 10.9410.
Norway is due to join other countries this week in announcing stricter measures to limit the spread of the coronavirus.
Traders will be watching for the new U.S. home sales later in the day, as well as consumer confidence index and durable goods data.
Elsewhere, the British pound recovered the lost ground, rising by 0.1% to $1.3057 GBP=D3 and by 0.4% against the euro to 90.56 pence EURGBP=D3.
Source: Reuters