LONDON (Reuters) – The dollar rose and currencies fell more risky on Friday, when President Joe Biden unveiled a $ 1.9 trillion stimulus plan offset by new U.S.-China tensions and a rise in disease COVID-19 in China.
The dollar index is on track for its biggest weekly gain since November 2020, with its recent recovery from three-year levels challenging the bearish dollar report for 2021.
Although the dollar rebounded slightly overnight after U.S. Federal Reserve Chairman Jerome Powell said “now is not the time” to talk about changing the Fed’s asset purchases, it picked up again as European markets opened up.
At 0830 GMT, the dollar index was at 90.458 against a basket of currencies, up 0.2% on the day. It was on track for a weekly gain of around 0.4%, making it the strongest week since November 2020.
Against a stronger dollar, the euro went down 0.3% at $ 1.2121 at 0831 GMT.
President Biden unveiled his $ 1.9 trillion stimulus package proposal Thursday, but analysts said market influence was limited by uncertainty over how easily Democrats will be able to afford it. get their suggestions through the Senate.
“The reality is that although the Democrats have now gained more power after winning last week’s escape elections in Georgia, that power is still at its limits, and details are great. the fiscal package reveals that the full size will be broken down before it gets the support it needs to get through the Senate, ”said Derek Halpenny, MUFG’s money strategist in a note to clients .
“While short-term, the U.S. dollar could expand further, the background of the big picture of the dollar remains negative. Fed astronomy and even Biden’s fiscal plan with rain down confirm the negative background ahead, ”he said.
The outgoing Trump administration lifted tensions with China, imposed sanctions on Chinese officials and companies, including an investment ban on nine more companies – moves China said are strong resisting.
Rising COVID-19 infections also pose a serious risk factor, as day-to-day conditions in China are peaking in more than 10 months.
France will tighten its COVID-19 border controls and extend its curfew by two hours, while German Chancellor Angela Merkel said she wanted “very swift action” to counter the spread of COVID mutations -19 after Germany had the highest number of deaths.
The Australian dollar – seen as a melting point for risk – was down about 0.5% at 0.7738 against the US dollar. The New Zealand dollar was also down on the day, around 0.6%.
The dollar rose about 0.2% against China’s offshore yuan, with the pair changing hands at 6.477 at 0834 GMT.
A deputy governor at the People’s Bank of China said on Friday that China’s monetary policy would provide the necessary support for the country’s economic recovery in 2021 and that the central bank would keep the yuan stable.
Reporting by Elizabeth Howcroft, edited by Larry King