Dollar dips as stocks gain on strong earnings, stimulus hopes

NEW YORK: The US dollar fell against a basket of currencies on Wednesday as investors' appetite for risk improved on strong corporate earnings and expectations of more stimulus measures for the pandemic-ravaged global economy.

US and European investors piled into stocks on Wednesday as companies in both regions posted a batch of positive earnings reports.

The dollar, a safe-haven currency, typically weakens when investors grow more comfortable holding riskier assets.

On Wednesday, the US Dollar Currency Index, which measures the greenback's strength against six major currencies, last was 0.334% lower at 92.84, but earlier came close to the more than two-year low of 92.593 touched last week.

"Clearly we have seen risk appetite rebound on global markets and sort of a return of the theme of a US underperformance relative to world counterparts," said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

US stocks also have become more attractive to overseas investors as the dollar has been pressured in recent weeks by worries about the American economic slide during the coronavirus pandemic.

The dollar extended losses on Wednesday after the ADP National Employment Report, which showed US private payrolls growth slowed sharply in July, suggesting a loss of momentum in the labor market.

"This morning's weak ADP data suggests we may see further weakness when nonfarm payrolls land on Friday," he said. "That is weighing on the dollar's prospects relative to the other majors."

Against the Swiss franc, the dollar fell to a more than five-year low, and was last trading down 0.6% at $0.9082.

Euro zone business activity returned to modest growth in July as many curbs imposed to stop the spread of the coronavirus were lifted, while official estimates showed retail sales volumes rebounded in June.

Investors also are watching negotiations between the White House and congressional Democrats trying to reach a deal on a relief package. Officials drew lines in the sand on Wednesday after more than a week of discussions, with some saying they viewed Friday as the deadline to reach a deal or drop talks.

The Australian dollar, which tends to rise when risk sentiment improves, was last up 0.47% at $0.7194 against the US dollar.