US dollar drops to lowest in more than 2 years


Posted at Dec 01 2020 12:14 AM

US dollar drops to lowest in more than 2 years 1
A US dollar banknote is seen in this illustration taken May 26, 2020. Dado Ruvic, Reuters/Illustration/File Photo

NEW YORK - The US dollar hit its lowest in two and a half years on Monday as broad risk sentiment improved overall, with investors looking to President-elect Joe Biden's economic team that is likely to push for more stimulus to counter the shock from the coronavirus pandemic.

The greenback was on course to post its worst monthly percentage loss since July.

Continued month-end dollar selling has also undermined the dollar on Monday, as global fund managers rebalanced their portfolios amid sharp gains in US stocks, analysts said.

In contrast, bitcoin on Monday hit an all-time high of $19,864 and was last up 8.3% at $19,707.

Hopes for further stimulus and a series of positive COVID-19 vaccine announcements has seen global market sentiment rally this month, prompting the dollar to fall and riskier currencies to strengthen.

Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington, said sentiment on the dollar as a safe haven has dimmed on "expectations that the incoming Biden administration would come with fewer impediments to global growth." 

He also expects the Federal Reserve to "maintain or redouble stimulus to keep a wavering recovery on track."

President-elect Joe Biden unveiled his picks for several top economic positions on Monday, including former Federal Reserve Chair Janet Yellen as his nominee for Treasury Secretary, setting the stage for a more diverse White House.

On the last day of the month, the dollar index was down 0.2% at 91.558

The euro rose to three-month highs versus the dollar of $1.20. The European Central Bank earlier signaled earlier this year it was carefully monitoring the euro-dollar exchange rate.

"We are reluctant to chase it higher amid stretched technical indicators and data showing divergence favoring the US, and ahead of the ECB meeting that is likely to be dovish." said Marc Chandler, chief market strategist, at Bannockburn Global Forex. 

The dollar was flat to slightly lower against the Chinese yuan in the offshore market, at 6.5727. 

Monday's data showed China's manufacturing grew at its fastest pace in more than three years in November, while services sector growth hit a three-year high, data on Monday showed.

The offshore yuan was on course for its longest streak of monthly gains in six years, boosted by China's economic recovery from the coronavirus and steady capital inflows.

Meanwhile the New Zealand dollar was poised for its biggest monthly gain since late 2013, helped by a perception that the improving global economic outlook lessens the risk of negative rates. It was last up 0.2% at US$0.7048, having hit a new two-year high overnight.

Brexit negotiations, meanwhile, remain the focus for the pound, which rose 0.4% versus the dollar to $1.3373, with the euro slightly down at 89.708 pence.

Britain and the European Union are running out of time to agree on a Brexit trade deal, but if good progress is made this week the talks could be extended, Britain's environment secretary said.


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