Dollar weakens as market looks to US stimulus; sterling falls

NEW YORK: The dollar slid against most currencies on Monday in choppy trading, as investors looked past the surge in coronavirus cases and ahead to a possible new COVID-19 US stimulus deal and vaccines to fight the pandemic.

Sterling, meanwhile, slumped after Britain and the European Union said on Monday conditions for a Brexit trade deal were "not there."

White House economic adviser Larry Kudlow on Monday said talks on another round of stimulus funding to deal with the deadly coronavirus pandemic are moving in the right direction, and President Donald Trump's administration and Congress are getting closer to agreement.

The United States has experienced increasing numbers of COVID-19 cases, with a death toll of about 283,000.

Negotiations on a relief deal gathered momentum in the US Congress on Friday, as a bipartisan group of lawmakers worked to put the finishing touches on a $908 billion stimulus plan.

"The market expects a stimulus deal to eventually arrive along with the vaccine and those are seen as putting the US recovery at a faster and more sustainable path," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. "That's negative for the dollar."

In addition, the Federal Reserve is expected to make more adjustments to its quantitative easing later this month.

"The question for most is whether this is just the beginning of the US dollar slide and whether the theme has more juice," said Mark McCormick, global head of FX strategy at TD Securities in Toronto.

"The US dollar is likely to slide through the course of 2021. US dollar cycles tend to last six years on average, and this one is just getting started," he added.

The dollar fell 0.2% against the Japanese currency to 104.01 yen, sliding as well versus the Swiss franc to 0.8904 franc, also down 0.2%.

The greenback also fell against commodity currencies such as the Australian and New Zealand dollars as well as the Norwegian crown.

An index that tracks the dollar against a basket of currencies was little changed at 90.843, not far from 90.471, its weakest since April 2018.

The British pound came off steep lows and was down 0.4% at $1.3379, falling 0.4 as well versus the euro, which last traded up at 90.52 pence.

EU chief Ursula von der Leyen and British Prime Minister Boris Johnson said in a joint statement on Monday that sealing a new trade deal was impossible now "due to remaining differences on critical issues."

But Johnson will go to Brussels in the coming days in an attempt to bridge significant differences in Brexit talks over level playing field, governance and fisheries.

"The market is still betting that at the end of the day, there will be a Brexit deal," said Western Union's Manimbo.