Dollar dips after best day in three weeks; euro hits lowest level in a week

NEW YORK: The dollar index retreated on Wednesday, a day after notching its biggest daily percentage gain in three weeks, and the euro hit its lowest level in a week as global equity markets remained cautious on waning hopes a COVID-19 vaccine or US fiscal stimulus was on the horizon.

The dollar jumped on Tuesday on concerns about the length of time before a COVID-19 vaccine would be available and on diminishing expectations that a fresh fiscal stimulus package would be agreed upon in the United States before the Nov. 3 presidential election.

The greenback was off its earlier lows, however, after US Treasury Secretary Steve Mnuchin said he and House of Representatives Speaker Nancy Pelosi were "far apart" on some details of a relief package, and an agreement would be hard to reach prior to the election.

"Right now the dollar is simply going back and forth on stimulus news, and it is not going very far," said Joseph Trevisani, senior analyst at FXStreet.com.

Earlier in the session, the greenback had extended declines after data showed the US producer price index for final demand rose 0.4% in September, topping the 0.2% forecast, after advancing 0.3% in August, amid a surge in the cost of hotel and motel accommodation that led to the first year-on-year gain since March.

The dollar index fell 0.197%.

The pound fell to $1.2865, its lowest level since Oct. 7, as hopes dimmed for a Brexit agreement, before recovering after Prime Minister Boris Johnson's spokesman said some progress had been made, although differences still remained in trade talks.

"For the pound it is pretty much Brexit - Boris says something good, it goes up, Boris says something bad, it goes down. It doesn't seem to be reacting terribly to the coronavirus," said Trevisani.

Sterling was last trading at $1.303, up 0.76% on the day.

The euro edged higher after its biggest daily percentage drop since mid-August on Tuesday.

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

European nations are extending restrictions well beyond social life to close schools, cancel surgeries and enlist legions of student medics as overwhelmed authorities face their nightmare scenario of a COVID-19 resurgence at the onset of winter.

The euro was up 0.06% to $1.17515.