Dollar steadies as angst over Trump's stimulus stance fades

LONDON: The dollar steadied on Wednesday, ticking down against most currencies after an initial jump triggered by US President Donald Trump cancelling stimulus talks with Democrat lawmakers, a move which increased demand for safe-haven assets.

Trump's surprise decision to call off stimulus talks until after the Nov. 3 presidential election initiated a selling spree on Wall Street with investors bracing for fresh downside risks for an already shaky US economy.

The initial shock from the announcement eased when the US President later asked Congress to extend $25 billion in new payroll assistance to US passenger airlines.

Sentiment improved overnight in Asia where markets hit a two-week high and US stock futures made their way back to positive territory.

All in all, analysts said the renewed uncertainty over stimulus would encourage investors to trade riskier currencies cautiously.

"This is set to reinstate caution in markets about the prospects of near-term economic recovery, helping the safe haven dollar and keeping cyclical FX soft", ING strategists wrote in a morning note.

In early trading in Europe, the dollar was last quoted at $1.1754 per euro, down 0.18% after a 0.4% gain against the common currency during the previous session.

The British pound was quoted at $1.2915, up 0.36% after losing 0.86% on Tuesday.

The Australian dollar edged up 0.57% to $0.7142 after tumbling by more than 1.1% on Tuesday.

Traders say the Aussie faces more downside risks due to expectations that the Reserve Bank of Australia's next move is to cut rates and buy more government debt.

The increased risk aversion, however, did not move the dollar much against the yen, which was last quoted at 105.75, because both currencies tend to be bought during times of uncertainty, analysts say.

Highlighting the potential danger of no additional stimulus funds to prop up the economy, Federal Reserve Chair Jerome Powell on Tuesday warned that the US economy could slip into a downward spiral if the coronavirus is not effectively controlled and called for more economic assistance.

Traders will look to minutes from the Fed's most recent meeting and comments from several Fed speakers later Wednesday for further signs of how central bankers view the outlook.