Dollar slips as outlook stays grim; offshore Chinese yuan rises

NEW YORK (Reuters) – The dollar fell to a one-week low on Tuesday, still weighed down by optimism over a coronavirus vaccine, as the outlook for the currency remained downbeat with the Federal Reserve and U.S. Congress poised to do more to ease COVID-19’s economic damage.

FILE PHOTO: U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking

The euro, sterling, Swiss franc and yen rose against the dollar, while the Chinese yuan hit its highest against the U.S. currency since June 2018.

Drugmaker Moderna MRNA.O became the second U.S. pharmaceutical company in a week to report positive results from trials of a COVID-19 vaccine, considered necessary to eradicate the pandemic.

Policymakers’ response to a record number of coronavirus cases, hospitalisations and deaths in several U.S. states is likely to remain of greater concern.

“We’re still seeing a follow-through from that vaccine optimism with yesterday’s news on Moderna,” said Edward Moya, senior market analyst at OANDA in New York.

“But the key story is still about COVID-19 and the short-term pressures it’s going to put not just on the U.S, but abroad and it’s going to force Congress or the Federal Reserve to do more. Whether we get a stimulus after (President-elect) Joe Biden takes office or whether the Fed does more, the trajectory for the dollar is pretty clear: it’s going to be much lower.”

In mid-morning trading, the dollar index =USD fell to a one-week low against a basket of major currencies, and last stood at 92.357, down 0.2%.

Data showing U.S. retail sales rising less than expected in October had minimal dollar impact. Retail sales rose 0.3% last month, the Commerce Department said on Tuesday. Economists polled by Reuters had forecast retail sales would gain 0.5% in October.

Against the yen, the dollar fell 0.4% to 104.12 JPY=EBS, while the euro inched higher by 0.1% to $1.1868 EUR=EBS.

“Euro/dollar remains well-supported, buoyed by global optimism,” said Chris Turner, global head of markets at ING in a note to clients.

“Given the challenges Europe faces – in the middle of a second lockdown – the euro certainly won’t lead the rally against the dollar, but we think the dollar decline is broad enough to drag euro/dollar back to $1.1920.”

Europe’s shared currency, however, fell against a broadly stronger pound, which gained on media reports that Britain could reach a post-Brexit trade agreement with the European Union by early next week. [GBP/]

The euro was last down 0.3% versus sterling at 89.56 pence EURGBP=EBS.

The offshore yuan CNH=EBS, meanwhile, hit its highest since June 2018 against the dollar at 6.5457 as positive economic data continued to support the Chinese currency.

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