U.S. dollar soared Wednesday as Trump postponed new stimulus

The U.S. dollar gained against most currencies on Wednesday after U.S. President Donald Trump postponed talks on economic stimulus with Democrat lawmakers. Investors’ demand for safe-haven assets grew after Trump commented on Twitter about the stimulus.

FX market had a few turbulent sessions since President tested positive on Covid-19. After Trump returned to the White House from the hospital, it calmed considerably. However, this new announcement caused volatility once more.

Trump’s abrupt decision to call off stimulus talks until after the Nov. 3 presidential election increases risks for an already shaky U.S. economy.

Masafumi Yamamoto, the chief currency strategist at Mizuho Securities, notes that the reaction is a type of risk-off trade to buy the greenback and the yen against other currencies. He added that the American economy would slow without additional stimulus, and the global economy will slow along with it.

How did major indexes trade?

The U.S. dollar was traded at $1.1734 per euro, holding onto a 0.4% gain in the previous session. Meanwhile, the British pound stood at $1.2887 after tumbling down by 0.86% on Tuesday. Optimism about Britain’s trade negotiations with the European Union couldn’t shield the sterling from the greenback’s advance.

The U.S. currency bought 0.9182 Swiss francs after jumping by 0.3% in the previous session. Before Trump’s statement, Federal Reserve Chair Jerome Powell warned that the U.S. economy could plunge into a downward spiral if the Covdi-19 is not effectively controlled. He also called for more economic assistance. That only increased traders’ panic.

Despite the increased risk aversion, the U.S. dollar did not move against the yen, which last stood at 105.70. According to analysts, both currencies tend to be bought during times of uncertainty.

The Australian dollar climbed to $0.7119 after plummeting by more than 1% on Tuesday. Investors think the Aussie faces more downside risks. Meanwhile, the New Zealand dollar traded at $0.6591, close to a one-week low.