Dollar Rises Despite Optimism on US Stimulus | Wibest Broker

The dollar rose on Tuesday morning in Asia’s forex exchange, despite edging closer to three-week lows. Some investors continue to hold onto hopes of large U.S. stimulus measures. They expect to prop up the COVID-19 ravaged economy after the presidential election on Nov. 3.

 Nikko Securities chief currency and foreign bond strategist Makoto Noji said there may be strong optimism on a stimulus. 

Noji said it’s hard to argue against fiscal expansion. Given the COVID-19 epidemic is almost like a natural disaster, he added.

The U.S. Dollar Index climbed up 0.11% to 93.207 by 10:04 PM ET. 

Other investors were skeptical though, that Republicans and Democrats would reach a consensus. They are doubtful that the two parties could pass the measures before the election.

Democrat Joe Biden is continuing to widen his lead against President Donald Trump. Investors anticipate that a Biden victory will bring big stimulus measures.

Should Biden win the elections, his campaign pledge to raise corporate taxes is seen as negative for the dollar. These taxes would reduce returns from investments in the U.S.

The Yuan

While the USD/JPY pair climbed 0.01% to 105.31, the USD/CNY rose 0.19% to 6.7580. Investors brace for Chinese trade data, including exports, imports and the trade balance, due later in the day. 

The offshore yuan is still wobbling from the impact of the removal of financial institutions’ reserve requirement ratio. This move was from the People’s Bank of China when conducting foreign exchange forwards trading. While it’s an attempt to curb the recent appreciation in the yuan, it also lowered the cost of shortening it.

On Wednesday, President Xi Jinping will also deliver a speech in Shenzhen during celebrations.  It will mark the city’s designation as a special economic zone.

Meanwhile, the AUD/USD pair lost 0.56% to 0.7167. The AUD was impacted by China’s reported suspension of Australian coal imports. The Australian government is currently seeking clarity from China.

The NZD/USD pair fell 0.20% to 0.6632 ahead of the Oct.17 general election. New Zealand’s incumbent Prime Minister Jacinda Ardern is widely expected to win.

The GBP/USD pair fell 0.16% to 1.3043, but remained above the key $1.30 level. Investors hopes for a Brexit deal with the European Union outweighed worries over Johnson’s new COVID-19 restrictions on Monday. 

Only two days remain until Prime Minister Boris Johnson’s self-imposed deadline of Oct.15. New restrictions involve a three-tiered system of local lockdowns, putting further pressure on the economy.