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Markets

Dollar dips as Biden transition, vaccines boost risk appetite

  • Trump acknowledged that the head of the General Services Administration should go ahead with a transition to a government led by President-elect Biden,
  • We had two big risk events taken off the table, one that the Trump administration was not going to allow for an orderly transition.
25 Nov 2020

NEW YORK: The US dollar fell on Tuesday as risk appetite improved after US President Donald Trump accepted the transition to a Joe Biden presidency and on optimism that COVID-19 vaccines are close to being rolled out.

Trump acknowledged that the head of the General Services Administration should go ahead with a transition to a government led by President-elect Biden, despite plans to continue with legal challenges to election results.

"We had two big risk events taken off the table, one that the Trump administration was not going to allow for an orderly transition, and also on the vaccine front _ the vaccine announcements over these last few weeks has well exceeded the most optimistic health experts forecast," said Edward Moya, senior market analyst at OANDA in New York.

The dollar index was last down 0.31% at 92.214, having reached a three-month low of 92.013 on Monday. It is holding above a key technical support at around 92, which analysts say would lead to further declines if broken.

The euro gained 0.35% to $1.1884 and the dollar gained 0.08% to 104.56 against the Japanese yen.

Riskier currencies outperformed with the Australian dollar last up 0.93% at $0.7354, after earlier touching an almost three-month high of $0.7367.

The New Zealand dollar hit a more than two-year high of $0.7005 as investors scaled back wagers of more policy easing by the country's central bank, and was last up 0.72% on the day at $0.6972.

Bitcoin gained more than 4% to $19,139 and is approaching its record high of $19,666 from December 2017.

"This has become a momentum trade," said Moya. "I think what has really driven Bitcoin these last few months is the expectations that we're going to have significant stimulus from central banks and governments."

Democratic allies to the Biden campaign said former Federal Reserve Chair Janet Yellen is expected to be nominated as Treasury Secretary, which has increased expectations of large fiscal stimulus.

She has called for increased government spending to lift the economy out of a coronavirus-induced recession.

That said, Yellen has also expressed concerns about rapidly rising US debt and the worsening budget deficit.

"She's had mixed comments I'd say on the federal budget," said Erik Nelson, a macro strategist at Wells Fargo. "I'm not saying she's going to be a big time budget hawk, but I don't know if she's quite as much of a budget dove as people are willing to admit."

Data on Tuesday showed that US consumer confidence fell more than expected in November amid a widespread resurgence in new COVID-19 infections and business restrictions, reinforcing expectations for a sharp slowdown in economic growth in the fourth quarter.