By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The dollar rose for a fourth straight session on Wednesday, as selling momentum eased with stocks under pressure, but positive vaccine news and prospects of more U.S. fiscal stimulus next year should temper gains on the greenback.
In afternoon trading, the dollar gained 0.1% against a basket of currencies to 91.027. It reached an April 2018 low of 90.47 last Friday.
The dollar hit session highs versus the yen and Swiss franc.
“Nasdaq is down 2% and whenever you see red on your screen, that’s another reason to buy the dollar,” said Erik Bregar, head of FX strategy, at Exchange Bank of Canada in Toronto. “I think we’re at a pretty interesting juncture here. I look at the S&P and I see a bearish outside day and it makes me queasy thinking about further losses.”
The euro fell 0.2% to $1.2080, but was still on track for an annual gain of roughly 8%, its largest since 2017.
The European Central Bank gathers on Thursday for its monetary policy meeting and Bregar said the market is expecting an increase to its Pandemic Emergency Purchase Program.
He added that exchange rate comments from the ECB are “the biggest unknown, given the recent rise in euro/dollar.”
(Graphic: Euro rises, https://fingfx.thomsonreuters.com/gfx/buzz/qzjvqdkbwpx/Pasted%20image%201607499495940.png)
Riskier currencies, including the Australian dollar as well as the Chinese yuan, led gains against the dollar, but have come off their highs. Both hit 2-1/2-year peaks earlier versus the U.S. currency.
A declining dollar, however, remained the pervasive sentiment in the market, although Francesca Fornasari, head of currency solutions at Insight Investment in London, was not convinced the currency’s weakness is a long-term trend.
“As we progress into 2021, it is not clear that the U.S. is at such a disadvantage to generate a significant drop in the dollar beyond what we’re experiencing, which may last a few months, and not necessarily a longer multi-year bearish trend,” Fornasari said at Insight’s virtual investment outlook event.
With U.S. coronavirus cases exceeding 15 million, regulators moved a step closer to approving a COVID-19 vaccine, while Britain started inoculating people on Tuesday.
Investors are also tracking negotiations over the U.S. coronavirus aid. Both factors have been supportive of the dollar in recent sessions.
The dollar dropped to 6.5198 yuan in onshore trading, its lowest since June 2018, putting the yuan up by more than 10% from its May lows, boosted by the softer dollar and steady inflows into Chinese stocks and bonds.
The greenback last traded up 0.2% at 6.5301 yuan.
Sterling was volatile, up 0.3% against the dollar at $1.3390.
British Prime Minister Boris Johnson began a crisis meeting over dinner in Brussels with the EU’s chief executive on Wednesday, hours after warning the bloc it must make concessions to clinch a Brexit trade deal and avoid a turbulent year-end breakup.
The Australian dollar, meanwhile, rose to its highest since June 2018 against the greenback and was last up 0.4% at US$0.7436.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Marguerita Choy and David Gregorio)