US Dollar Strengthens – Delay in Next Round of Stimulus Supports
Early on Tuesday, the US dollar is regaining its strength as the market sentiment takes a hit over the ongoing rise in coronavirus cases and amid uncertainty about the next round of fiscal stimulus measures for the US economy. At the time of writing, the US dollar index DXY is trading around 90.43.
Markets turned somewhat risk-off over the previous session, sending equity markets lower while bond yields rose higher, and supporting the safe haven appeal of the US dollar. The cautious mood in the markets has also caused the Euro and the yen to trade somewhat rangebound as traders worry about fresh restrictions being imposed in Europe to combat the spread of the pandemic.
Investors are also apprehensive about possible delay in rolling out President Biden’s proposal for an additional $1.9 trillion stimulus package. Expectations for a speedy rollout of more financial aid tempered after Biden’s recent remarks while addressing reporters, “I don’t expect we know we’ll have an agreement … until we get right to the very end of this process, which will probably happen in a couple of weeks.”
As plans for more spending take longer to get approved, economic recovery in the US looks set to get delayed. Against the backdrop of a continued rise in fresh infections and weak economic data, investor confidence in the world’s most powerful economy has weakened, further supporting the greenback as a safe haven currency.
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