The dollar traded near 2-1/2-year lows against major peers on Tuesday as demand for the safest assets flagged amid progress toward agreeing U.S. fiscal stimulus and optimism for a Brexit deal. The greenback was near its weakest since mid-2018 versus the riskier Aussie and kiwi dollars in early Asian trading with U.S. lawmakers scurrying to ready $1.4 trillion in spending.
A $908 billion bipartisan Covid-19 relief plan will be split into two packages, a person briefed on the matter said, raising hopes that at least a large part of the plan that already has bipartisan support will be approved.
Across the Atlantic, European Union Brexit negotiator Michel Barnier said that sealing a trade pact with Britain was still possible, sowing hope that a deal can be reached with just days to avert a turbulent exit for the UK from the trade bloc at the end of the month.
The British pound was little changed against the dollar at $1.3332, after rising 0.8% on Monday. It reached a 2 1/2-year high of $1.3540 earlier this month. The greenback slipped 0.1% to $1.2150 per euro, trading near a 2 1/2-year low of $1.2177 touched again on Monday.
Covid-19 vaccine roll-outs in the U.S. and UK also buoyed risk sentiment, but optimism was tempered by spikes in infection and death rates. London will go into a tighter lockdown amid the discovery of a new variant of the virus.
The dollar index was little changed at 90.688 after Monday sinking as low as 90.419, a level unseen since April 2018. The currency was little changed at 104.00 yen, another traditional safe haven asset. “With the roll-out of vaccines starting in the U.S. and the UK, we expect shutdowns to reduce in frequency and intensity, allowing the USD to resume its downtrend,” Commonwealth Bank of Australia currency analyst Joe Capurso wrote in a client note.
An agreement on fiscal stimulus would also “undermine” the U.S. dollar, he wrote. The Aussie rose 0.1% to 75.372 U.S. cents after touching the highest since June 2018 at 75.780 on Monday. The New Zealand dollar also added 0.1% to 70.86 U.S. cents after reaching 71.20 the previous session for the first time since April 2018.