Dollar Down Over Yellen’s Urge to “Act Big” on COVID-19 Relief

By Administrator_India

Capital Sands

The dollar was down on Wednesday morning in Asia, with investors digesting U.S. Secretary of the Treasury nominee Janet Yellen’s big spending comments. The euro held onto its gains as a better-than-expected sentiment survey in Germany brightened the mood.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged down 0.11% to 90.365 by 9:17 PM ET (2:17 AM GMT).

The USD/JPY pair edged down 0.10% to 103.78. The safe-haven yen briefly passed the 104 mark against the dollar over the improved sentiment but fell against other major currencies earlier in the session. The Bank of Japan is also due to hand down its policy decision on Thursday.

The AUD/USD was up 0.27% to 0.7715 and the NZD/USD pair edged up 0.12% to 0.7126. The risk-sensitive Antipodean currencies saw gains during Wednesday’s session, holding onto the gains made during the previous session.

The USD/CNY pair inched down 0.03% to 6.4757. The yuan held onto modest gains in offshore trade ahead of the People’s Bank of China announcing January’s loan prime rate. No changes are expected in both the one-year and five-year loan prime rates.

The GBP/USD pair edged up 0.14% to 1.3647 The pound was supported after Bank of England chief economist Andrew Haldane’s prediction during a webinar on Tuesday that the U.K.’s economy could begin to recover “at the rate of knots” from the second quarter of 2021.

Meanwhile, Yellen urged Congress to “act big” on COVID- 19 relief and not worry too much about debt during her Senate confirmation hearing before the Senate Finance Committee on Tuesday. Her comments helped mitigate the risk-adverse tone seen earlier in the week and turned investors away from the safe-haven U.S. currency.

“The stimulatory bias of the incoming Biden administration’s economic policy is again at the center of market attention,”.

“However, seesawing between expectations of reflation and current soft economic data will probably continue for a while longer,” the note added, limiting upside for currencies such as the NZD.

Yellen could be confirmed as soon as Thursday to head the Treasury, and U.S. President-Elect Joe Biden will take office later in the day. Investors are paying more attention to the blitz of policies promised, rather than the inauguration itself.

Across the Atlantic, the euro gained around 0.4% against the dollar overnight, and hovered around $1.2145 earlier in the session. The currency was boosted by both the Italian government surviving a confidence vote as well as a better-than-expected ZEW economic sentiment survey in Germany.

The index read 61.8 for January, above the 60 in forecasts prepared by Investing.com and December’s 55 reading.

The European Central Bank is also due to hand down its policy decision on Thursday.