USD Flat After Initial Jump On Demand For Safe-Haven Assets

USD Flat After Initial Jump On Demand For Safe-Haven Assets

07 October 2020

USD exchange rate got steady on Wednesday, after jumping initially the day before when higher demand for safe-have assets was observed.

USD’s Rate Flat

                On Wednesday the USD exchange rate was flat, a bit down against most of currencies, after initially and day before it raised on higher demand for safe-haven assets. The movement in exchange rates was triggered by the cancellation of talks on aid package with Democrats lawmakers by US President Donald Trump. It made investors in mood to buy safe-haven currencies, including USD. In difficult times investors tend to buy Swiss francs, Japanese yens or US Dollars. In the early Wednesday trading the US dollar was down versus euro’s exchange rate by 0.18%, to 1.1754 dollars, after a gain of 0.4% in the previous, Tuesday’s session.

Trump Cancels Talks

                Donald Trump decided to cancel talks on stimulus until after the presidential elections, that takes place on Nov. 3. Trump has stated that the House of Representatives Speaker Nancy Pelosi was not negotiating in good faith. The announcement was shocking to markets and started a selling frenzy on Wall Street. Investors were preparing for new risks with already very difficult situation of the US economy. But the shock eased when soon after Trump asked Congress to extend payroll assistance to passenger airlines operating in US to 25 billion dollars. Overnight sentiments on financial markets improved, which Asian stock hitting a two-week high, US stock futures also reporting gains. Still, the uncertainty over whether and when new aid package to Us economy will be provided make investors less prone to buy risky assets.

Danger for Economy

                The lack of additional stimulus for US economy in times of pandemic could be very dangerous, according to the Federal Reserve Chair Jerome Powell, who on Tuesday warned that the country’s economy could spiraled down if coronavirus is not controlled. According to him, more economic assistance is a must. Investors in US and globally will now check carefully minutes from last FED’s meeting and comments from policymakers that should arrive late on Wednesday, to see how the central bank’s outlook for future might be.

Demand for Safe-Haven Assets

                On Tuesday, just after Trump called off negotiations with Democrats, there was observed a demand for safe haven assets. Still it didn’t trigger much higher USD exchange rate against the Japanese yen, that was priced at 105.75, as both of these currencies are purchased by investors in uncertain times. Previously, USD exchange rate was down as investors were optimist that a aid package deal is close to be voted on. On Tuesday, its index against the major currencies went up to 93.80, by 0.34%.

Other Currencies

                In other news, the British pound prices was 1.2915 dollars, up 0.36%, getting back to gains after a loss of 0.86% on Tuesday. Meanwhile in Australia, the local dollar was traded at 0.7142 US dollars, up by 0.57%, also regaining its ground after Tuesday’s loss of 1.1%. The expectations of experts is that the Reserve Bank of Australia will cut interest rates at the next meeting and decide to buy more government banks, which makes AUD exchange rate facing more risks.

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