Dollar Halts Slide as Mnuchin Calls an End to Fed’s Lending

Dollar bills

The dollar halted its slide in forex exchange on Friday. This came after the U.S. Treasury Secretary Steven Mnuchin’s call to end some of the Federal Reserve’s pandemic lending. It was derailing a risk rally and surprising investors who had counted on the Fed’s support.

Mood was previously positive as the U.S. Senate Republican and Democrat leaders agreed to resume talks on another stimulus package. 

Mnuchin’s move was directed at re-appropriating around $455 billion allocated to the Treasury. This will be under the CARES Act in the spring for other spending. Some investors were concerned about stopping programmes they deem have played a vital role in reassuring markets.

According to the Fed, it prefers that the full suite of emergency facilities continue to serve their role as a backstop.That’s an unusual open confrontation with the government. These were the facilities established during the pandemic. 

California ordered a curfew placed on all indoor social gatherings and non-essential activities. These were outside the home across most of the state in a major escalation of measures to curb the virus surge. This has also soured risk appetite. 

The dollar has lost ground for over a week, against riskier currencies due to coronavirus vaccine breakthroughs. Hopes of reduced political uncertainty after the U.S. election were high.

Currencies Movements

The dollar index was off Thursday’s low of 92.236, now standing at 92.306 . It is still down 0.3% on the week, though.

The euro fetched $1.1874, flat on the day. However, it isn’t far from its high of $1.18935 touched on Tuesday and up 0.3% on the week.

In Asia’s forex, the yen stood at 103.80 per dollar , retaining its weekly gain of 0.8%.

However, compared with the U.S. stocks and bond markets, the reaction in currency markets has been limited. 

European leaders will urge the European Commission to publish no-deal Brexit plans as the year-end deadline approaches, according to reports. This has put the British pound on the defensive.

The British pound changed hands at $1.3258 . It stood at 0.8955 pound per euro, wiping its gains of over the past two days.

On the Antipodean side, the Australian dollar, which is sensitive to economic sentiment, stood little changed at $0.7284. It has erased most of its gains this week.

After a 2 1/2-year high of 6.5318, the offshore Chinese yuan was flat at 6.5716 to the dollar. This was after it hit a 2 1/2-year high of 6.5318.

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