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FOREX-Dollar clings to gains as traders wait for China growth data

Published 19/10/2020, 11:06 am
© Reuters.
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* NZD, AUD +0.2% as strong China GDP data anticipated

* Dollar steady elsewhere as election risks temper bets

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook

SINGAPORE, Oct 19 (Reuters) - The dollar clung to gains on Monday, supported by investor worries about the looming U.S. election and the fading prospects of any fiscal stimulus beforehand, while the Chinese yuan held firm ahead of the release of quarterly growth data.

The dollar index =USD was steady in early trade, following a 0.7% rise last week when a global surge in coronavirus cases and an impasse over the stimulus package stoked caution.

The risk-sensitive Australian and New Zealand dollars edged higher on expectations that data due later on Monday shows strong growth in China, and on faint hopes that Democrats and the White House could agree on a new spending program. AUD/

But enthusiasm was tempered by the opposition of Senate Republicans and as investors focused on what the election outcome means for stimulus later, with a Joe Biden victory seen weakening the dollar by boosting sentiment with big spending.

The Antipodean currencies rose about 0.2% each, with no real reaction from the kiwi to the landslide election victory of Jacinda Ardern's Labour party over the weekend. The euro, yen and sterling were all steady in morning trade in Asia.

"Fiscal remains the buzzword," said Chris Weston, head of research at Melbourne brokerage Pepperstone.

"But forget the Republicans' move to pass a $500 billion bill, it will not see the light of day, and expectations of a new stimulus bill have been pushed into 2021."

He said a Biden administration with control of the Senate could pass a stimulus program as large as $3.5 trillion.

Something closer to $1 trillion was probable if Biden won the presidency but the Democrats failed to win the Senate, Weston said, while a Donald Trump victory and a split Congress could limit spending to between $500 billion and $1 trillion.

Fifteen days out from election day, Biden leads Trump by about ten points in national polls, and has a narrow lead in several battleground states. The pair are due to face off in a final debate on Thursday.

"Markets will be attentive to any potential shift in polls, although traditionally the last debate has less impact in public opinion," Barclays (LON:BARC) analysts said in a note.

"The main risk for markets now would be a tightening in polls, which would reduce the likelihood of a large Democratic fiscal stimulus package and could raise the likelihood of a long contested election."

The main focus of traders in Asia on Monday is Chinese growth and economic data due at 0200 GMT.

The yuan CNH= has largely shrugged off hints last week from Chinese policymakers that its recent rise has been too fast and too large, returning to sit near an 18-month high of 6.6788 in anticipation of strong GDP growth and capital inflows.

The yuan last sat at 6.6930 in offshore trade.

Investors globally are pinning hopes on a robust recovery in China to help restart demand as economies struggle with heavy lockdowns and a second wave of coronavirus infections.

The world's second-largest economy likely grew 5.2% in July-September from a year earlier, faster than the second quarter's 3.2%, according to a Reuters poll. bid prices at 2353 GMT Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Euro/Dollar

EUR=EBS

$1.1715

$1.1718

-0.02%

+4.50%

+1.1730

+1.1712 Dollar/Yen

JPY=D3

105.4300

105.3950

+0.00%

-2.97%

+105.4600 +0.0000 Euro/Yen

EURJPY=

123.52

123.48

+0.03%

+1.29%

+123.5500 +123.4100 Dollar/Swiss

CHF=EBS

0.9150

0.9152

+0.00%

-5.43%

+0.9152

+0.0000 Sterling/Dollar GBP=D3

1.2925

1.2920

+0.05%

-2.53%

+1.2927

+1.2888 Dollar/Canadian CAD=D3

1.3179

1.3184

+0.01%

+1.49%

+1.3191

+1.3181 Aussie/Dollar

AUD=D3

0.7093

0.7078

+0.22%

+1.09%

+0.7095

+0.7073 NZ

NZD=D3

0.6616

0.6605

+0.18%

-1.66%

+0.6618

+0.6605 Dollar/Dollar

All spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX

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