Dollar shrugs at Biden stimulus plan

Currency markets are unmoved by Biden wish-list

Currency markets entered a holding pattern overnight, ahead of the Biden stimulus release, and have remained to circling in Asia this morning. Part of the reason is that the fiscal package contents were well telegraphed beforehand and contained no reactionary surprises. The stimulus package comes with an impressive headline figure of USD1.90 trillion. None of it appears to be funded by tax increases, so another torrent of bond issuance is on the way.

This past week, a significant driver of currency movement, US Treasury yields drifted overnight, with poor Jobless Claims and a very dovish Jerome Powell dampening upward pressure from the Biden package. Thankfully, Federal Reserve Chairman Jerome Powell signalled overnight that tapering the Fed’s bond-buying targets was not on the table, nor would it be for the foreseeable future.

The dollar index edged lower by 0.13% to 90.25 in directionless trading and is unchanged in Asia today. EUR/USD and USD/JPY were almost unchanged, although GBP/USD, NZD/USD and AUD/USD also rose by 0.60% ahead of the Biden stimulus announcement. All three have pro-cyclicals have seen some profit-taking in Asia today.

Although the Chinese yuan held steady at 6.4700 today after the PBOC fixed USD/CNY at a neutral 4.4633, Asian regional currencies renewed their ascent overnight versus the US dollar. The Singapore dollar, Korean won, Indonesian rupiah and Malaysian ringgit all traced out modest gains, as investors returned to the pro-cyclical recovery trade after dollar strength faded. Asia trading has been very muted though, with most regionals unchanged on the day.

Asia markets appear content to coast out the last day of the week, with the data calendar international very low on releases likely to have much market impact. The last weekend of the Trump presidency may also be discouraging new position-taking as attention turns to next week’s inauguration.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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