Investors Take Money Off the Table after a Week of Dollar Selling

On Friday, the US dollar took a breather after it endured a week-long beating that pushed it far below the major support levels. The greenback’s slide attracted more short-sellers who were interested in making a quick buck. The big moves enabled traders in Asia to skim some profits, which had even pushed the US currency to a nine-month low against the Japanese currency. The safe-haven yen saw itself fall against the likes of the rallying kiwi, Aussie, and euro. On Friday, the dollar strengthened by 0.3% at 103.39 against the yen. It also climbed by the same margin against the New Zealand and Australian dollars.

There was a 0.2% gain against the euro. Nonetheless, it remained down against the yen by 0.6% in this week and fell below the lowest value it had reached in September. It is also on course for a seventh straight weekly fall against the Antipodeans and will also fall against the euro by 1.1%. As far as sterling is concerned, it is on course for a gain of 2.4% in the week against the US dollar. This is the best weekly increase in the last six months, driven by hopes of a Brexit trade agreement before the end of the year.

Currency analysts said that markets were hopeful that there would be a breakthrough in the US stimulus talks and Brexit resolution. Instead of prompting a safety bid in dollars, soft US economic data only increased expectations of investors regarding a government spending package. This would boost risk appetite and consumption, which would increase pressure on the greenback. The dollar climbed by 0.15% against a basket of major currencies to reach 89.986, which wasn’t much higher than the two-and-a-half-year low it had hit on Thursday. There is a 1% fall in the US dollar for the week and it had declined by 12.6% after a three-year peak back in March.

Bitcoin had held steady in Asia, but it surged by nearly 20% this week to reach record highs above $23,000, as investment has poured in from institutional investors who consider it as an inflation-protected store of wealth. Moving towards the weekend, traders are focusing on the progress of the US fiscal package negotiations and Brexit trade talks, as this will set the tone for the last couple of weeks of the year. A new roadblock to the coronavirus aid package emerged on Thursday in the Congress, as a few Senate Republicans insisted that Federal Reserve lending programs shouldn’t be revived.

The European Union and Britain also were downbeat about the possibility of a deal on Thursday, but traders have chosen to hope for resolution in both areas. The Norwegian crown had made some sharp gains on Thursday, which it handed back after hints of rate increase by the central bank and a wave of new coronavirus cases also took its toll on the South Korean won, as hospitals become strained. The dollar had climbed against the won by half a percent.