Dollar wavers, pound swung by Brexit gyrations

Tokyo - The dollar slipped 0.1 per cent to 103.47 yen, another traditional haven.

By Reuters

Published: Wed 23 Dec 2020, 9:53 AM

The dollar wavered against major peers in choppy trade on Wednesday as uncertainty about U.S. fiscal stimulus, Brexit and the pandemic recovery pushed investors into and out of riskier bets.

In holiday-thinned trade, the pound rebounded from a three-day decline as time runs out for London to reach a trade deal with Brussels before the UK completes its exit from the European Union at year-end.

The dollar index was little changed at 90.447 in Asian hours, after advancing 0.5 per cent on Tuesday. It remains on track for a more than 6 per cent decline this year.

The market has been positioned for a pandemic recovery that lifts global growth, sapping demand for the greenback and other haven currencies.

The riskier Australian dollar gained 0.5 per cent to $0.75515, while the euro added 0.2 per cent to $1.21875.

Sterling rose 0.2 per cent to $1.3384, on track to end a three-day slide.

“People have some concerns about COVID and about Brexit, but it’s not at the point where the positive sentiment has turned,” said Shinichiro Kadota, senior currency strategist at Barclays Capital in Tokyo.

“We expect the dollar to remain weak.”

US Congress passed an $892 billion COVID-19 aid package overnight, and vaccine rollouts are gaining momentum.

That development has since been clouded by President Donald Trump’s threat not to approve the stimulus bill, saying it should be amended to increase the amount in the stimulus checks, though this has had little impact on currency markets so far.

“I don’t know how much of this is posturing by Trump or if he’s really demanding these changes,” said Barclays’ Kadota.

“The muted reaction so far suggests the foreign-exchange market expects the bill to pass in some form.”

The dollar slipped 0.1 per cent to 103.47 yen, another traditional haven.

It was little changed at 6.5402 Chinese yuan in the offshore market. It changed hands at 6.5495 yuan on-shore.

With only days left before the UK leaves the EU’s trade orbit, the pound has vacillated as it awaits signs of progress in negotiations.

A deal is possible on Wednesday, an ITV reporter tweeted, just hours after saying there would be no agreement before Christmas.

Earlier, the EU’s chief negotiator said the bloc is making a “final push” for a trade deal, although there are still deep rifts over fishing rights.

“The market is just waiting for the final result of Brexit talks, and in the meantime being swung by conflicting headlines,” Barclays’ Kadota said.

“Sterling will remain volatile.”

Photo: Reuters
Photo: Reuters

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