Dollar climbs as Trump quarantines and stimulus stalls

SINGAPORE: The dollar climbed on Friday as doubts crept in about the prospects of a new U.S. stimulus package and President Donald Trump entered quarantine after a close aide caught COVID-19, prompting investors to trim bets on riskier currencies.

The dollar index rose 0.2%, though it remains set for its softest week in more than a month as stimulus hopes stoked appetite for riskier assets earlier in the week. It has lost 0.7% since last Friday's close.

Likewise the risk-sensitive Australian dollar fell 0.4% to $0.7157 on Friday but remains up 1.8% for the week. The euro fell 0.3% to $1.1715 on Friday.

“Wait and hope or wait and worry - the market is hovering between these two,” said Bank of Singapore FX analyst Moh Siong Sim, as the stimulus deal and a Trump virus test hang in the balance, and with crucial U.S. data also due later on Friday.

Trump said on Twitter that he and first lady Melania would go into quarantine as they await their own test results after adviser Hope Hicks tested positive for COVID-19.

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have also so far failed to bridge what Pelosi described as differences over dollars and values.

Analysts view their talks as a last-gasp effort to secure relief ahead of the Nov. 3 election for tens of millions of Americans and business including U.S. airlines, which have begun furloughing over 32,000 workers.

“Markets surely remain susceptible to the lack of a deal this side of the election,” said National Australia Bank’s head of foreign exchange strategy, Ray Attrill.

The safe-haven Japanese yen JPY= ticked lower on Friday, easing 0.1% to 105.64 per dollar. But it has not been swept up in the week's positive mood and is flat for the week.

Sterling remained under pressure on Friday after sinking on Thursday as the European Union began legal proceedings over a British plan to override parts of their divorce deal.

The pound was last down 0.2% at $1.2859.

“Both the US fiscal stimulus and Brexit negotiations are not closer to a deal,” said OCBC Bank strategist Terence Wu in Singapore.

JITTERS

Investors are also watching with concern as coronavirus infection rates climb in Europe and the United States, while awaiting U.S. labour figures for a read-out on the economic recovery.

U.S. non-farm payrolls likely increased by 850,000 jobs in September, according to a Reuters survey of economists. That would leave employment 10.7 million below its level in February. Data is due at 1230 GMT.

In the United States, a record increase in new cases in Wisconsin on Thursday fanned fears of hospitals there being overwhelmed.

Elsewhere, Madrid will become the first European capital to go back into lockdown in coming days to fight a steep surge in cases.

Commodities, notably copper and crude oil, slid on persistent worries about global growth.

“Let’s not get ahead of ourselves in terms of market sentiment, and we think it is too early to re-embrace the risk-on / weak dollar dynamic just yet,” said OCBC’s Wu.