NEW YORK (Reuters) – The dollar fell to three-week lows on Friday on optimism that a deal for new U.S. stimulus would be reached, and as investors bet that Democrat Joe Biden is more likely to win the U.S. presidency and offer a larger economic package.
U.S. House Speaker Nancy Pelosi said she would resume talks on a possible COVID-19 stimulus package with Treasury Secretary Steven Mnuchin on Friday, while Senate Republicans voiced doubts that a deal can be reached before the Nov. 3 election.
Republican President Donald Trump, who initially withdrew from the negotiations this week only to regain interest in forging a bipartisan accord, said he was open to a larger deal.
“It seems like, at least in the White House, there is more of a sense of urgency that it needs to be done,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto. However, “the key question for us is whether or not the Senate Republicans are going to go with it … they don’t seem to be united.”
“I think we’re more or less in a standstill until we get some more clarity on whether or not this stimulus package is going to go through,” Rai said.
The dollar index against a basket of major currencies <=USD> fell 0.54% to 93.05, the lowest since September 21, and fell below its 50-day moving average for the first time since then. It has held within a range from 91.74 to 94.75 since late July.
The euro <EUR=> rose 0.57% to $1.1825. The greenback weakened 0.39% against the Japanese yen <JPY=> to 105.60 yen.
The U.S. currency also fell on rising expectations that Biden will win the Nov. 3 election, and that Democrats could win the Senate. A Democratic victory would likely result in larger stimulus, which would be negative for the dollar.
Rising expectations of a Biden victory has also boosted appetite for currencies that have been hurt by the trade war between Washington and Beijing, with the Chinese currency the biggest beneficiary.
The offshore yuan <CNH=> strengthened to 6.6778, the strongest since April 2019.
The British pound rose, brushing off worse than expected UK growth data as investors became more optimistic about a Brexit deal being reached ahead of a key European Council summit next week.
Sterling <GBP=> gained 0.79% to $1.3035.
(Additional reporting by Saikat Chatterjee in London; Editing by Nick Zieminski and Marguerita Choy)