Dollar Down Over Increasing U.S. Stimulus Package Hopes

The dollar was down on Tuesday morning in Asia over rising hopes that the U.S. Congress will reach an agreement over the latest stimulus measures to ease the economic impact of COVID-19.

The U.S. Dollar Index, which tracks the greenback against a basket of other currencies, inched down 0.03% to 93.468 by 9:52 PM ET (1:52 AM GMT).

House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin spoke for about an hour on Monday via a phone call, with topics discussed including the measures. The pair are scheduled to speak again later in the day. White House Chief of Staff Mark Meadows added to the optimism, saying that potential for an agreement in Congress on more economic relief measures is still there, with President Donald Trump also committed to seeing a deal struck and passed.

The optimism is tinged with caution, however, as COVID-19 spreads among key policy making figures. The list includes Trump, who tested positive for the virus during the previous week alongside wife Melania Trump.

Trump returned to the White House on Monday after his three-night stay at the Walter Reed National Military Medical Center, which also contributed to investors’ increased risk appetite. However, he will remain under medical surveillance, after White House physician Sean Conley’s warning that the president may “not be out of the woods yet”.

Some investors placed more importance on the progress of stimulus measures than Trump’s return home.

“I think hopes of U.S. stimulus are the main driving force,” Mizuho Securities chief currency strategist Masafumi Yamamoto told Reuters.

“As for Trump’s discharge, the impact is not clear-cut but it is seen as positive for the risk environment to the extent that there are less worries about the White House getting caught in complete chaos and unable to make decisions,” Yamamoto added.

The USD/JPY pair inched down 0.01% to 105.70.

The AUD/USD pair edged up 0.15% to 0.7189. Australia is awaiting the Reserve Bank of Australia’s policy decision, due later in the day. Although expected to keep its benchmark interest rates unchanged at 0.25%, some investors are now expecting a cut to 0.10%. The government will also hand down the annual budget later in the day.

The NZD/USD pair inched up 0.09% to 0.6651, and the USD/CNY pair was flat at 6.7908. Chinese markets are closed for a holiday.

The GBP/USD pair inched up 0.07% to 1.2986, despite continuing concerns about a no-deal Brexit as informal negotiations between the U.K. and the European Union (EU) continue.