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TOKYO (Reuters) – The dollar fell against its major peers on Thursday as optimism that the massive stimulus package from the new U.S. administration will support growth weakened demand for safe-haven currencies.
Riskier commodity currencies were supported, with Asian stocks following US stocks to hit new records after Joe Biden, who laid out plans for a $ 1.9 trillion pandemic relief package , was sworn in as president.
“Risk sentiment is quite positive right now and we expect it to remain so this year, with growth expected to rebound quite strongly,” said Shinichiro Kadota, senior currency strategist at Barclays Capital in Tokyo.
The Canadian dollar and the Norwegian krone are expected to outperform, while European currencies lag behind, he said.
The greenback is also expected to strengthen this year against the euro as the United States recovers faster than most other countries, he added.
The US currency slipped 0.2% to C $ 1.2611 in Asia, falling for a third day. It hit a three-year low at C $ 1.2607 overnight, after the Bank of Canada chose not to cut interest rates.
The dollar slipped 0.4% to 8.456 Norwegian kroner, also a third day of decline.
The Australian dollar rose 0.4% to 77.74 US cents, adding to a 0.7% rally in the previous session. Australia saw another solid increase in employment in December, data showed Thursday.
Biden was sworn in as the 46th President of the United States on Wednesday, vowing to end the ‘uncivil war’ in a deeply divided country rocked by a battered economy and a raging coronavirus pandemic that has killed more than 400 000 Americans.
North of the border, the Bank of Canada said on Wednesday that the arrival of a COVID-19 vaccine and stronger foreign demand were improving the medium-term economic outlook, choosing to keep its overnight key rate at 0 , 25%. Money markets were watching for the prospect of a so-called micro rate cut of less than 25 basis points.
The dollar lost 0.2% to 103.59 yen on Thursday, another safe haven currency, after falling to a two-week low of 103.33.
The Bank of Japan kept monetary policy unchanged on Thursday while revising its economic forecast upwards for the next fiscal year.
The euro gained 0.2%, reversing a similar decline from the previous session, to trade at $ 1.2135.
The European Central Bank also decides its policy on Thursday, with no expected change.
European countries are struggling to contain the new coronavirus, fearing that a new variant could lead to tighter lockdowns and greater economic pain.
The dollar index slipped 0.2% to 90.268, down for a third day since hitting an almost one-month high of 90.956 on Monday.
The greenback started the year on a more solid footing, supported by higher US Treasury yields in response to Biden’s massive stimulus plan.
But many analysts expect a return to the dollar’s bearish trend which has seen it lose nearly 7% in 2020 as US monetary policy remains ultra-loose and hopes for a post-pandemic global recovery.
“The weakness of the USD against emerging markets and commodity currencies has yet to be explained in the context of global reflation led by US vaccines and stimulants, but the outlook for the USD against the euro are not so clear in the short term, ”Westpac strategists wrote in a research note.
“A reassessment of the US outlook following Biden’s $ 1.9 billion budget spending plan against a still weak eurozone picture could in theory keep the USD strong against the euro . “
Full coverage for Eikon readers of the US presidential transition here
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Reporting by Kevin Buckland; Editing by Simon Cameron-Moore
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