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US Dollar Fights for Traction – 29 December 2020

US Dollar Index falls by 0.33%; Aussie and Kiwi benefit from improving outlook.

USDThe US Dollar Index remained close to a 2½ year trough during London trade on Tuesday as Forex traders sought out assets with higher risk yields. On Monday, a vote in the House of Representatives to increase aid to $2,000 (from an initial $600 offer) was sent to the Senate where it will be voted on. That will set up a challenge between the Republicans, who only want the $600 per person aid package, and the Democrats, who want that amount increased to $2,000. While the President has said he would sign off on the package if it included stimulus of $2,000 per person, it is likely to be challenged in the GOP by members who are no longer “afraid” of the President’s ire.

In London trading as of 10:44 am, the US Dollar Index was trading at 90.04 .DXY, down 0.33%. The GBP/USD was trading higher at $1.3482, a gain of 0.2558%; the pair has ranged from a trough of $1.34392 to a high of $1.35238 in today’s session. The EUR/USD was trading at $1.2446, up 0.3121% and off the session peak of $1.22587. The USD/JPY was lower at 103.6300 yen, down 0.15%, moving off the session trough of 103.596 yen.

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In the UK, while the news that a bare bones Brexit deal was approved, the pound is still in the doldrums as Forex traders gauge what exactly that will mean for sterling in the longer term. Equity markets were more optimistic about the news, pushing stock prices higher on a global basis. That helped to provide support for currencies which are higher risk, including the Australian and New Zealand dollars. Both the AUD/USD and NZD/USD have benefited from the improved global outlook; the pairs are trading higher, respectively, at $0.7598 (up 0.24%) and $0.7132 (up 0.4381%).

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