Dollar pares losses as Senate’s McConnell vague on further stimulus

NEW YORK (Reuters) -The dollar pared losses on Tuesday after earlier reaching a more than two-year low against the euro, but remained lower on the day as investors weighed whether an increase in U.S. fiscal stimulus is likely.

U.S. Senate Majority Leader Mitch McConnell on Tuesday blocked immediate consideration of a measure to increase COVID-19 relief payments to $2,000. He suggested the Senate would at least examine the issue.

“This just really delays the inevitable,” said Edward Moya, senior market analyst at OANDA in New York.

“With the Biden administration coming into place you’re going to have expectations that we’re going to see another attempt at more stimulus, and that’s why I think the dollar trimmed its losses but very limitedly,” Moya said.

The dollar fell 0.28% against a basket of currencies to 89.99. It is holding just above a two-and-a-half year low of 89.72 reached on Dec. 17.

Trading is thin with many investors out between the Christmas and New Year holidays.

The euro gained 0.28% to $1.2251 after getting as high as $1.2274, the strongest since April 2018.

The Aussie gained 0.39% to $0.7610. It reached $0.7639 on Dec. 17, the highest since June 2018.

The greenback slipped 0.29% against the Canadian dollar to 1.2810 Canadian dollars. The loonie reached 1.2684 on Dec. 17, the strongest since April 2018.

Investors are betting the greenback will continue to decline – it is down 6.77% this year – on expectations the Federal Reserve will hold interest rates near zero and the U.S. economy will struggle to recover from coronavirus-related shutdowns.

Data released by the Commodity Futures Trading Commission on Monday showed traders increased bets against the dollar in the week ended Dec. 21 to $26.6 billion. That was the highest in three months, according to Reuters calculations.

A key factor on how much more stimulus is forthcoming will also be two Georgia Senate runoffs next month that will determine which party controls the upper U.S. chamber.

“I think consensus is that Republicans will win one of those seats,” said Moya. However, “the Democrats might have a one-in-three chance of pulling this off and that is not reflected in prices right now.”

The euro was also buoyed on Tuesday by a trade deal reached last week for Britain to leave the European Union. Though the agreement is not comprehensive, it avoided a damaging no-deal outcome.

Sterling rose 0.33% to $1.3500 following a two-day dip. It was as high as $1.3625 this month, a level unseen since May 2018, but investors have taken some profits since the Brexit trade deal was struck.

Bitcoin < BTC=BTSP> fell 0.61% to $26,871 after hitting a record $28,378 on Sunday. The currency has surged 275% this year as it gains more acceptance from mainstream investors.

XRP the third-biggest digital currency, slumped 13% after Coinbase, a major U.S. virtual coin exchange, said it would suspend XRP trading.

The move came after U.S. regulators charged Ripple, a blockchain firm associated with XRP, with conducting a $1.3 billion unregistered securities offering. Ripple has denied the charges.

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Currency bid prices at 3:19PM (2019 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 89.9890 90.2430 -0.28% +0.00% +90.2530 +89.8510

Euro/Dollar $1.2251 $1.2216 +0.28% +9.27% +$1.2275 +$1.2207

Dollar/Yen 103.5100 103.8250 -0.33% -4.72% +103.8000 +103.4850

Euro/Yen 126.85 126.77 +0.06% +4.02% +127.2300 +126.7100

Dollar/Swiss 0.8845 0.8886 -0.46% -8.59% +0.8887 +0.8831

Sterling/Dollar $1.3500 $1.3460 +0.33% +1.82% +$1.3521 +$1.3443

Dollar/Canadian 1.2810 1.2849 -0.29% -1.38% +1.2849 +1.2780