Dollar holds on to gains; euro touches nine-day low

LONDON: The dollar index held its recent gains on Wednesday and the euro touched a nine-day low, as global equity markets remained cautious in light of diminishing hopes for a COVID-19 vaccine or US fiscal stimulus.

The rally in global equities started to run out of steam on Tuesday and risk appetite suffered, with the dollar index seeing its biggest daily jump in three weeks.

Johnson & said it was pausing a clinical trial of a coronavirus vaccine and Eli Lilly and Co also said it had paused a clinical trial of an antibody treatment.

British drugmaker AstaZeneca Plc's US trial for a vaccine has been on hold for over a month.

Most major currency pairs saw only small moves on Wednesday.

The pound was the biggest mover in early London trading, falling as low as $1.2865 as hopes dimmed for a Brexit agreement, before recovering to $1.2950.

The dollar index was at 93.554 at 1045 GMT, flat on the day, having briefly risen and exceeded the previous session's high of 93.599.

Euro zone industrial production data showed the rate of recovery slowed sharply in August, in line with expectations.

"The small gain in August leaves us with the impression that the first months of rapid recovery from the lockdown period are behind us," wrote Bert Colijn, a senior economist at ING.

"With rebound effects fading, second waves emerging and restrictive measures becoming more intrusive for business, there is no doubt that the rosy figures related to the rebound from the first lockdown are a thing from the past," he added.

At 1046 GMT, euro-dollar was down 0.1pc on the day, at 1.17360.

Hopes for a new coronavirus relief package in the United Sates faded.

The Senate is due to vote next week on a targeted $500 billion aid bill of the type that Democrats have already rejected.

Kit Juckes, head of FX strategy at Societe Generale, said that the market was characterised by "ennui" and "angst", in the absence of a clear driver before the US elections.

But markets still expect that a victory for Democrat Joe Biden in the US presidential elections will result in more fiscal stimulus.

"The assumption of Biden legislating a large fiscal stimulus package will continue to limit fallout in the markets from the lack of near-term fiscal stimulus," wrote MUFG strategist Derek Halpenny.

The yen and Swiss franc both rose around 0.1pc versus the dollar. But there were still some signs of risk appetite, as the Australian and New Zealand dollars edged up.

The Australian dollar was up 0.1pc on the day at 0.71690 versus the US dollar at 1053 GMT, and the New Zealand dollar rose 0.3pc to 0.6663.

"Both Australian and New Zealand dollars, when you look at how well the Chinese economy's doing, fundamentally, I think they're both in good shape, in the medium term," Societe Generale's Juckes said.

China's third-quarter gross domestic product growth is expected to improve from the previous quarter, a People's Bank of China official said.

The Norwegian crown was up around 0.2pc against the dollar, at 9.234.

The International Monetary Fund gave a slightly improved forecast for the hit to global growth in 2020, but lowered their forecasts for many emerging markets.