Dollar holds on to profits; Euro hits nine-day low

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LONDON (Reuters) – The dollar index held its recent gains on Wednesday and the euro hit a nine-day low as global equity markets remained cautious amid fading hopes for a COVID-19 vaccine or US tax incentives.

FILE PHOTO: George Washington is shown with a medical mask printed on the one dollar bills in this March 31, 2020 illustration. REUTERS / Dado Ruvic / illustration

The rally in global equities ended on Tuesday and risk appetite suffered. The dollar index saw its biggest daily jump in three weeks.

Johnson & said a clinical trial with a coronavirus vaccine was suspended, and Eli Lilly and Co also said a clinical trial with antibody treatment was suspended. The US study of the British drug manufacturer AstaZeneca Plc for a vaccine was suspended for over a month.

Most major currency pairs saw little movement on Wednesday. The pound was the biggest motor in early London trading, falling to $ 1.2865 as hopes of a Brexit deal faded before rebounding to $ 1.2950.

The dollar index was at 93.554 at 1045 GMT, flat the day after rising momentarily and breaking the previous session’s high of 93.599.

Industrial production data in the eurozone showed that, as expected, the recovery rate slowed sharply in August.

“The small gain in August gives the impression that the first few months of the rapid recovery from the lock-up period are behind us,” wrote Bert Colijn, ING’s senior economist.

“As rebound effects wear off, second waves emerge, and business restrictive measures become more intrusive, there is no doubt that the rosy numbers associated with rebound after the initial lockdown are a thing of the past,” he added.

At 1046 GMT, the euro dollar fell 0.1% on the day to 1.17360.

Hopes for a new coronavirus relief package in the United States faded. The Senate will vote next week on a targeted $ 500 billion auxiliary bill, which the Democrats have already rejected.

Kit Juckes, Head of FX Strategy at Societe Generale, said the market was “bored” and “scared” as there was no clear driver ahead of the US election.

However, markets continue to expect that a Democrat Joe Biden victory in the US presidential election will result in more fiscal stimulus.

“The assumption that Biden will pass a large stimulus package will continue to limit the impact on markets due to the lack of short-term stimulus,” wrote MUFG strategist Derek Halpenny.

The yen and Swiss franc rose around 0.1% against the dollar.

But there were still signs of risk appetite as the Australian and New Zealand dollars rose.

The Australian dollar rose 0.1% on the day to 0.71690 against the US dollar by 1053 GMT and the New Zealand dollar rose 0.3% to 0.6663.

“Both the Australian and New Zealand dollars, if you look at how well the Chinese economy is basically doing, I think they’re both in good shape over the medium term,” said Societe Generale’s Juckes.

China’s third quarter gross domestic product growth is likely to improve quarter over quarter, an official with the People’s Bank of China said.

The Norwegian krone rose around 0.2% against the dollar to 9.234.

The International Monetary Fund issued a slightly improved forecast for the impact on global growth in 2020, but lowered its forecasts for many emerging markets.

Reporting by Elizabeth Howcroft, Editing by Larry King

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