The dollar increased on early Monday trade as more unstable currencies fell after negotiation on a U.S. stimulus package ran into resistance. The yuan declined after PBoC (China’s central bank) took a measure seen as aimed at curbing its strength.
Moreover, the euro dropped by 0.1% and settled at $1.1817, while the Australian dollar decreased by 0.3% to $0.7222. The yen had little changed to $105.52 to the U.S. Dollar.
Meanwhile, the U.S. dollar index touched 93.108 from Friday’s three-week low of 92.997. The index witnessed its most significant loss in six weeks on Friday on hopes that a deal for new U.S. stimulus would be reached.
Significantly, on Friday, U.S. President Donald Trump offered a $1.8 trillion coronavirus relief package in discussions with House Speaker Nancy Pelosi. Investors think that Democrat Hoe Biden is likely to win the U.S. presidency offers a more extensive economic package. Elections will take place Tuesday, November 3, 2020.
According to Yusuke Okada, the Mitsubishi Trust Bank manager, the markets seem to assume Biden will win the election. Trump looks desperate to get a deal, but his comments are getting treated like noise.
Yusuke Okada thinks we could see a return of political uncertainties by the election. Markets appear to have priced in only the good news.
Additionally, after the PBOC (People’s Bank of China) said Chinese yuan would reduce the reserve requirement ratio for financial institutions, the offshore Chinese yuan declined.
According to analysts, the measure could keep the yuan’s strength in check by supporting forwards.
The yuan reached a 17-month high on Friday
Significantly, the yuan reached a 17-month high on Friday, in onshore and offshore trade, having grown above 6% against the dollar since May, pushed by a favorable yield differential between China and other leading economies.
According to Masashi Hashimoto, Senior Economist at the Institute for International Monetary Affairs in Tokyo, the Chinese economy’s relative strength supported the yuan. China has managed the Covid-19 pandemic much better than some other countries.
Masashi Hashimoto reported that Chinese authorities seemed to have grown wary of the yuan’s stability.
The yuan last traded at 6.7171 per dollar in offshore trade, decreased by 0.4%.
The Sterling traded at 1.3035 per dollar. It hit a one-month record of $1.3050 on Friday on guarded confidence about Brexit negotiations ahead of a European Union summit this week.
Moreover, Boris Johnson, British Prime Minister, has set a deadline for the October 15 EU summit.