Dollar Recovers from 2-Year Low Amid Hopes of Stimulus Deal

The US dollar showed some signs of recovery after falling for consecutive seven weeks as it reached 93.597 on August 11, 2020, from a 2-year low of 92.495 on August 7. Investors expect more recovery in its value and hoping a bi-partisan economic stimulus deal to take place in Washington.

Traders credit rebounding of the yields on 10-year U.S. Treasuries, which reached 0.581% after relentless lows for several months, for gains in the value of the dollar.

The value of foreign currencies against the US dollar also showed a little bit of change with Euro standing at 1.1741, lira at 7.320, and the Yen at 105.96. Driven by all this, the S&P 500 index reached a five-month high on August 10, 2020.

Excited with recovery in the Dollar, MUFG Bank’s chief currency analyst Minori Uchida said that it would diminish the possibility of any cut-off of extra unemployment benefits.

On August 8, 2020, executive orders were signed by U.S. President Donald Trump to extend unemployment benefits and defer payroll taxes.

However, JPMorgan’s head of Japan rates and FX research Takafumi Yamawaki is of the opinion that as investors expect an economic stimulus deal, the government’s measures so far to boost the economy would be insufficient.

Amid all this, on August 10, 2020, the Congressmen and Trump administration announced to restart talks over a COVID-19 aid deal. But Democrats and Republicans need to sort out their differences to make it happen.

Investors are also looking carefully at the growing tensions in the U.S.-China relations as in a politically motivated reaction; China banned few Republican lawmakers after the U.S. imposed sanctions on some Chinese and Hong Kong officials.

Furthermore, Steven Mnuchin, the U.S. Treasury Secretary, threatened to delist Chinese companies, among others, from the U.S. stock exchanges by the end of 2021 if they failed to comply with accounting standards.