Is the dollar’s value falling further?
Dollar falls as investors eye more U.S. stimulus; sterling sinks
The U.S. dollar index traded near a 2-1/2-year low on Monday after weak U.S. jobs data heightened expectations of economic aid, while sterling slumped as Britain and the European Union made a last-ditch attempt to strike a trade deal. Fears grew of a chaotic no-trade deal Brexit on Dec. 31 when the United Kingdom finally leaves the EU.
“The question for most is whether this is just the beginning of the U.S. dollar slide and whether the theme has more juice,” said Mark McCormick, global head of FX strategy at TD Securities in Toronto. “As we noted in our 2021 Global Outlook, the U.S. dollar is likely to slide through the course of 2021. Yet, it’s unlikely to be a straight line. U.S. dollar cycles tend to last six years on average, and this one is just getting started,” he added.
In the United States, Friday’s jobs data showed non-farm payrolls increased by 245,000 last month, the smallest gain since May, a sign the jobs recovery was slowing. Talks aimed at delivering fresh coronavirus relief gathered momentum in the U.S. Congress on Friday, as a bipartisan group of lawmakers worked to put the finishing touches on a $908 billion bill. Members of Congress are expected to offer the legislation as early as Monday.
In addition, the Federal Reserve is expected to make more adjustments to its quantitative easing later this month. “In the current trading environment, the increasing speculation over looser U.S. fiscal and monetary policies provides support for risk assets and weighs on the U.S. dollar,” Lee Hardman, currency analyst at MUFG, said. An index that tracks the dollar against a basket of currencies fell 0.2% to 90.6889, not far from 90.471, its weakest since April 2018.
Over the past week, the U.S. dollar sell-off has extended further, with weakness most evident against the Swiss franc, euro and Canadian dollar. The euro rose 0.3% to 1.2157, but remained close to $1.2177, its highest since April 2018. Earlier data showed booming car sales drove a stronger-than-expected jump in German industrial output in October.
Leveraged funds continued to add more euro long positions in the week to Dec. 1, taking the total amount of $21 billion, according to data from the Commodity Futures Trading Commission (CFTC). The British pound was down 0.9% at $1.3321 , falling 1.1% versus the euro, which last traded up at 91.08 pence. The dollar fell 0.2% against the yen to 104.01 yen. The Australian dollar rose 0.2% to US$0.7436 versus the U.S. dollar.