A £10 note is seen alongside a US dollar bill.
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The dollar languished near a 2-1/2-year low on Tuesday as investors were encouraged to take on more risk as U.S. lawmakers pushed forward with an enhanced Covid-19 relief package.
The House of Representatives voted on Monday to increase stimulus payments to qualified Americans to $2,000 from $600, sending the measure on to the Senate for a vote.
Last week’s Brexit agreement, while bare bones, also supported the outlook for global growth, lifting Asian stocks on Tuesday following Wall Street gains.
“Optimism abounds, and it’s generally coming from equity markets,” said Bart Wakabayashi, Tokyo Branch manager of State Street Bank and Trust.
“The dollar is very heavy, and that will continue into next year.”
The dollar index declined 0.3% to 90.06 in holiday-thinned trading, wallowing near the 89.723 level reached on Dec. 17 for the first time since April 2018.
Short positions on the dollar swelled in the week ended Dec. 21 to $26.6 billion, the highest in three months, according to Reuters’ calculations based on data released by the Commodity Futures Trading Commission on Monday.
The euro rose 0.2% to $1.2237, hovering near the 2-1/2-year high of 1.22735 touched earlier this month.
The dollar bought 103.53 yen, little changed against another safe-haven currency.
Sterling rose 0.3% to $1.348 following a two-day decline. It was as high as $1.3625 this month, a level unseen since May 2018, but investors have taken profits following the confirmation last week of a Brexit trade deal.
While the pact came as a relief, it leaves Britain far more detached from the EU, analysts say.
“People are still trying to figure out what this Brexit agreement means,” weighing on the pound, said State Street’s Wakabayashi.
“Nothing has really been agreed on financial markets, and that’s a big negative for the UK.”
Go to the news source: Dollar languishes amid pandemic aid optimism, pound meanders