NEW YORK (Reuters) – The dollar on Friday rose against major currencies such as the euro and yen, with traders consolidating positions amid competing forces that pull the currency in different directions: the surge in virus cases, on the one hand, and positive vaccine news, on the other.
The possible resumption of U.S. stimulus talks for COVID-19 relief has also weighed on the dollar as a safe haven. Republican and Democratic senators agreed on Thursday to revive those discussions
Overall, the greenback ended the week on a loss against a currency basket. The week started off on a negative note for the dollar with positive news on a vaccine for COVID-19, but the market has since moved back and forth between focusing on coronavirus cases and the virus drug.
“We think we are in the early stages of a recovery in the global economy and trade from the shock of the pandemic and this will further” weigh on the dollar and support the euro,” Jonathan Petersen, markets economist, at Capital Economics, said.
U.S. Treasury Secretary Steven Mnuchin, meanwhile, defended on Friday his decision to end several of the Federal Reserve’s key pandemic lending programs on Dec. 31, saying Congress should use the money to help small U.S. companies with grants instead.
The dollar briefly rose overnight after the Mnuchin news late Thursday.
“The request comes as most lending facilities haven’t been tapped for more than the amount committed by the Treasury to backstop the programmes, suggesting market functionality is sufficient to warrant their expiration,” said Monex Europe in a research note.
In afternoon trading, the dollar was flat against a currency basket at 92.369 in a quiet day for currency markets.
Action Economics noted some pre-weekend selling in the euro going into the London close.
“The lack of progress between the European Union and the U.K. on Brexit trade talks has likely kept a cap on the euro despite generally waning U.S. dollar sentiment,” it said in its daily blog.
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Currency bid prices at 3:32PM (2032 GMT)
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Reporting by Gertrude Chavez-Dreyfuss; Editing by Steve Orlofsky and Marguerita Choy