The U.S. dollar remained around its lowest in three weeks on Tuesday. The situation comes as investors are stuck on expectations that there will be a big US fiscal stimulus after the election that will be done on the 3rd of November this year.
Reportedly, the stimulus will be provided to shore up the pandemic-hit economy and support the development of risky currencies. This aspect is waited by some parties. The dollar index was at 93.036, just above Friday's nearly three-week low of 92.997.
The Euro currency was trading at $1.1841, after rising by 0.60% on Monday. The stimulus is still the expected aspect nowadays in the market. On the other hand, oil prices are reportedly rising again after previously being hit by delta storms.
Strong Optimism Remains
There seems to be a strong optimism that the stimulus will be given as soon as possible. It's hard to argue for fiscal expansion given that the coronavirus epidemic is already like a massif natural disaster in the world.
It was conveyed by Makoto Noji, head of currency and foreign bond strategy at SMBC Nikko Securities. Meanwhile, markets are increasingly skeptical about the possibility of having a bipartisan package before the next election. Further decisions can be not in line with the expectation.
The greater advantage of the Democratic presidential candidate, Joe Biden, over President Donald Trump makes investors expect greater stimulus after the election. However, this has had another impact on the further market situation and for sure the economic condition.
Biden's victory was also viewed negatively for the dollar. This is because part of his promise to raise corporate taxes will be. He also said he would reduce the return on investment in the United States. The decisions like this that are somewhat anticipated.
Dollar Weakens Against Other Currencies
Under these conditions, the dollar also weakens against currencies considered "safer". It is a type of currency that tends to have a small or inverse relationship with risk sentiment. The examples are like the yen and the Swiss franc.
The yen reportedly strengthened to 105.34 per dollar. Meanwhile, the Swiss franc was trading at 0.9102 per dollar. The figure is near its highest level in three weeks. Of course, this is a surprising rise and a surprise to some.
Elsewhere, Sterling traded above the key $1.30 level due to expectations for a Brexit deal. The situation offset concerns about the pressure on the economy from Boris Johnson's announced coronavirus restrictions. How about the other currencies?
The pound was near its strongest level in two weeks against the euro, moving at 0.9043 pounds. On the other hand, the Australian dollar fell by 0.4% to $0.7183. This was not helped by media reports that China had stopped accepting Australian coal shipments.
The Oil Price is Steady
As the dollar weakened, oil prices stabilized in early trading on Tuesday. It comes after oil weakened nearly 3% from the previous session after supply resumed in Norway, the US Gulf of Mexico, and Libya. Production resumed to normal again.
The return of supply comes as covid-19 infections resurfaced in the U.S. Midwest and Europe raising concerns about the growth in demand for these fuels. This situation poses challenges for the Organization of the Petroleum Exporting Countries and its allies or OPEC+.
OPEC+ has a limited supply to help prop up oil prices amid a coronavirus pandemic that still occurs today. The size of the cuts is 7.7 million barrels per day that will be held until December. Meanwhile, the manufacturers’ market monitoring panel will meet next Monday.
The WTI crude futures (CLc1) rose as little as 1 cent to $39.44 a barrel. Meanwhile, Brent crude futures rose 2 cents to $41.74 a barrel. With workers returning to the U.S. Gulf of Mexico platform after Hurricane Delta, all eyes are now on Libya.
