Dollar Down Despite U.S. Stimulus Impasse and Rising COVID-19 Cases

The dollar was down on Thursday morning in Asia, despite the ever-rising number of COVID-19 cases and the U.S. Congress’ lack of progress towards passing the latest stimulus measures ahead of the Nov. 3 presidential election continuing to dampen investor sentiment.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.02% to 93.398 by 9:58 PM ET (1:58 AM GMT).

The impasse over the measures continues, with Treasury Secretary Steve Mnuchin warning on Wednesday that “Getting something done before the election and executing on that would be difficult.” Mnuchin added that he and House of Representative Speaker Nancy Pelosi remain “far apart” on their spending priorities. With the election only weeks away, investors’ risk aversion gave the greenback a short-term boost.

France triggered fears of a fresh waves of global lockdowns as it imposed curfews to curb the rising number of COVID-19 cases.

The USD/JPY pair inched up 0.09% to 105.25, above a two-week high of 105.04 seen during the previous session.

The AUD/USD pair was down 0.26% to 0.7144, in the wake of Reserve Bank of Australia (RBA) Governor Philip Lowe teased bond buying and a small rate cut among RBA’s options for policy support on the road to recovery.

With Australia’s ten-year yield among the highest in the developed world, Lowe said that RBA was looking at the benefits from buying longer-dated debt, adding that a rate cut to 0.10% from the current, record low 0.25% was also possible.

Markets reacted quickly to the news, with ten-year bond futures rising 6.6 ticks to their highest point since April and investors already preparing for a rate cut in November.

“These are pretty explicit policy options that are plausibly going to be considered,” Westpac FX analyst Sean Callow told Reuters.

“There was enough vibe in there for the market to lean towards (thinking) that they will do something,” he said. “Anyone who was thinking about a November cut would be feeling better about it now,” Callow added.

Even September’s 6.9% unemployment rate, slightly down from August’s 7.1% reading, failed to lower rate cut expectations nor boost the AUD.

The NZD/USD pair inched up 0.05% to 0.6658 ahead of the Oct. 17 general election.

The USD/CNY pair inched up 0.02% to 6.7147. China released data earlier in the day showing that the consumer price index rose 1.7% year-on-year in September, down from the predicted 1.8% rise and August’s 2.4% growth. The producer price index also fell 2.1% year-on-year, more than the forecast 1.8% fall and the 2% fall reported in August.

The GBP/USD pair inched up 0.06% to 1.3018, passing the 1.3 mark. The pound helped onto its gains from the previous session over signs of progress in the U.K.’s Brexit talks with the European Union (EU). The two parties are also likely to extend the talks past Prime Minister Boris Johnson’s self-imposed Oct.15 deadline to reach a deal, in order to work through their remaining differences.

“This was seen as a positive for sterling because there was some risk that Johnson might tell his EU counterparts that he was walking away,” National Australia Bank’s head of FX Ray Attrill told Reuters.