Japanese Yen soared Wednesday along with risk-on currencies

The Japanese yen rallied to 105.66 per dollar on Wednesday. The Australian and New Zealand dollars gained as well, surging towards multi-month highs hit last week.

The Aussie climbed up by 0.2% to $0.7172. Meanwhile, the kiwi won support from an unexpected fall in unemployment. It traded 0.3% stronger at $0.6639 on Wednesday.

The Euro last stood at $1.1808 and the British pound was steady at $1.3080. It seems that the U.S. is recovering much more slowly than Europe. Positive reports lifted the common currency just below a two-year high.

In recent weeks, the Euro has been the U.S. dollar’s prime antagonist. In July, it posted its best month in almost ten years against the greenback. Despite that, analysts at ING stated that equity investors have yet to really buy into the European recovery story.

Meanwhile, the dollar traded under pressure due to plunging U.S. yields. Congress is still debating about the latest coronavirus relief package, which isn’t helping matters.

What caused the U.S. currency’s collapse?

Failure to agree on a fiscal package had pushed back the U.S dollar. But if Congress agrees on something in the next few days, the greenback will likely bounce back – noted Imre Speizer, the FX analyst at Westpac in Auckland.

Meanwhile, traders’ focus turned to the Washington stalemate and U.S. private jobs data. White House negotiators promised on Tuesday to work around the clock with congressional Democrats to try to make a deal on Covid-19 relief by the end of this week.

While they are arguing about the stipulations, lawmakers have allowed a $600-a-week unemployment benefit to lapse. According to Treasury Secretary Steven Mnuchin, they are not going anywhere close to the $3.4 trillion that Democrats have been seeking.

The dollar has been falling since March, as central bank liquidity measures and calmer markets have eased demand for the world’s reserve currency. However, with this disagreement in full swing, the currency dropped even lower still.