A £10 note is seen alongside a US dollar bill.
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The dollar hovered close to two-year lows on Tuesday as progress toward a massive U.S. government spending bill and COVID-19 relief measures boosted spirits while investors awaited interest rate cues from the Federal Reserve’s final meeting of the year.
The dollar index, which measures the greenback against a basket of currencies, was last at 90.5750 , after sinking as low as 90.419 on Monday, a level unseen since April 2018.
Hopes that U.S. lawmakers can agree $1.4 trillion in spending and more clarity about COVID-19 vaccine distribution have whetted investors’ risk appetite, driving them away from safe-haven currencies.
Those sentiments spurred Wall Street’s main indexes higher on Tuesday.
In another step toward broader vaccine distribution, Moderna Inc’s COVID-19 vaccine appeared set for regulatory authorization this week after U.S. Food and Drug Administration staff endorsed it as safe and effective in documents released Tuesday.
“We have equity market moves based on vaccine headlines and prospects for fiscal stimulus, but if you look at the bigger picture, nothing’s really changed,” said Ronald Simpson, managing director, global currency analysis at Action Economics.
The dollar, which barely reacted to data published on Tuesday for U.S. industrial production and New York State manufacturing will likely remain under pressure into 2021 as vaccines roll out and economies re-open, Simpson said.
The Fed, which begins a two-day meeting later on Tuesday, is expected to keep its key overnight interest rate pinned near zero and to signal it will stay there for years to come. Such moves would further boost investors’ confidence for risk-taking, analysts said.
Many analysts also expect new guidance on how long the Fed will keep up its massive bond-buying program.
Broad-based selling of the U.S. dollar drove the euro to hover near a 2-1/2 year peak on Tuesday. The single currency has rocketed 4% since early November to its highest level since April 2018, in part because of broad-based selling of the U.S. dollar and as investors bet a vast European recovery fund package will lift the regions’ economies.
The euro was last at $1.2152, up 0.07%..
Elsewhere, sterling continued to maintain its Monday surge, triggered by news Britain and the European Union would keep on talking to try and seal a Brexit trade deal. The pound was last at 1.3377, up 0.38%.
The Australian dollar was up 0.11% to $0.7540 after touching the highest since June 2018 at $0.7578 on Monday.
Bitcoin was last at $19,396.45, up 0.81%.
“The big picture is that 2021 looks increasingly promising for global growth, and while the U.S. will certainly be a part of that, the global reflation trade is going to support the risk-sensitive currencies like the Australian dollar,” said Westpac currency analyst Sean Callow.
“The dollar is likely to be in the group of laggards, along with the likes of the yen.”
Go to the news source: Forex markets: Dollar, British pound