Dollar slips as US stimulus impasse halts rebound

LONDON: The dollar slipped on Wednesday as political wrangling over a stimulus package for the US economy halted its recent rebound.

Investors are watching for signs a political impasse in Washington over a further rescue package for the pandemic-hit economy can be overcome.

The dollar, which has held above a two-year low hit last Thursday of 92.495, was down 0.2pc against a basket of currencies at 93.525, after shedding gains made in Asian trading.

"If there is no movement in the negotiations soon, the Fed's concerns are quite likely to have an impact on the dollar sooner or later," FX analysts at Commerzbank said in a note.

US inflation figures due at 1230 GMT are expected to show consumer price growth has drifted down to 1.1pc on a year-on-year basis, from 1.2pc in June.

The dollar made gains against the yen, with the Japanese currency down 0.3pc, after slumping to 106.885 earlier, its lowest since July 24.

Improved US debt yields have pressured the yen by luring investment from zero-yielding Japan.

Sterling was broadly flat, despite data showing the British economy had entered a deep recession, as signs of a recovery in June provided some support for the currency.

The New Zealand dollar fell 0.4pc to $0.6555, after the country's central bank held rates but surprised markets by extending its bond-buying programme and putting slightly more emphasis on the possibility of negative rates.

"Taken together, that's why interest rates have fallen a few basis points and why the kiwi fell," said Westpac FX analyst Imre Speizer.

"That's a modest dovish reaction."