LONDON: The dollar edged up from seven-week lows on Thursday as hopes for a fiscal package in the United States before the November elections crumbled again and the global surge in Covid-19 cases fuelled demand for safe-haven assets like the greenback.
Progress towards a US stimulus deal has boosted sentiment in world markets and lifted demand for riskier assets in recent sessions - weighing this week on the dollar, which tends to weaken when risk appetite picks up. But pressure on the currency eased after US President Donald Trump on Wednesday accused Democrats of being unwilling to craft an acceptable compromise.
News that Europe has seen the number of coronavirus cases surge to a record high, with Spain becoming the first Western European country to exceed 1 million infections, added to the cautious tone in world markets.
This backdrop appeared to favour the dollar, which had fallen for the last three days against a basket of other major currencies.
"There are a host of risk events that you could argue threatens risk assets and those threats should support the dollar," said MUFG's head of research, Derek Halpenny.
"Yesterday's moves were so significant, and with no new news to follow through on, there is a modest recovery in the dollar."
The dollar index was last trading at 92.863, a touch firmer on the day and above the 92.469 low hit on Wednesday that marked the lowest level since Sept. 2. The euro was a quarter of a percent lower at $1.18325, down from Wednesday's one-month highs of $1.18805.
And the dollar was firmer against Japan's currency at 104.73 yen, above a one-month low hit during the previous session at 104.345. The tone in currency markets was generally subdued as investors waited for new impetus. A final debate between President Trump and Democratic rival Joe Biden takes place later in the day.
"The US Presidential elections are only 12 days away, before that nobody wants to commit too much to a particular direction in euro/dollar," said Commerzbank FX analyst Esther Reichelt. Having hit six-week highs on Wednesday amid Brexit optimism, sterling too pulled back against the US currency. The British pound was last down 0.4% at $1.3093.
The Australian dollar was 0.3% softer versus the greenback, while the New Zealand dollar was a touch firmer at $0.6658 - up from the $0.6551 low touched on Tuesday. Elsewhere, the Chinese yuan retreated from a 27-month high on signs that the authorities have become increasingly wary over the recent rapid gains in the currency. The offshore Chinese yuan was last down 0.4%at 6.6724 per dollar.
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