Dollar slumps as markets focus on Fed, U.S. fiscal aid

28.07.2020 - Korneychuk Evgeniya
Dollar slumps as markets focus on Fed, U.S. fiscal aid

The dollar fell again on Tuesday as the U.S. economy drops into stagnation, while investors await the latest outlook from the Federal Reserve and the passage of the U.S. coronavirus fiscal stimulus.

The dollar’s decline lifted gold prices and the yen to its four-month high, while the euro stood below its 22-month peak and the kiwi neared its strongest level since January.

The yen rose to 105.25 on the dollar and the euro gained 0.1% to $1.1766. The Aussie was up 0.2% to $0.7160, nearing its 15-month high. The kiwi steadied at $0.6685, while the pound hit a new four-month top of $1.2925.

The dollar has been under pressure since the end of May but intensified when the EU fiscal deal was passed, while the surge in U.S. coronavirus cases cast doubt on the country’s economic recovery.

The dollar index is nearing its worst month in a decade after falling 7% since May. Investors are capitalizing on short dollar positions, which rose to its highest in two years. Still, the yuan failed to take advantage of the dollar’s weakness due to the escalating U.S.-China tensions.

The currency market is awaiting the passage of the U.S. coronavirus aid package–currently debated by Democrats and Republicans in the senate–as it could cause an imminent rebound for the dollar.

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