Dollar Weakens as Politicians Squabble and Inflation Rises

Thursday,   13-Aug-2020   12:47 PM (IST)

The dollar weakened in early European trade Thursday, amid fading hopes for additional economic stimulus while inflation figures surprised to the upside. At 3 AM ET (0700 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.3% at 93.157. USD/JPY was down 0.2% at 106.72, GBP/USD rose 0.3% to 1.3066 and EUR/USD was up 0.4% at 1.1826. Weighing on the greenback has been the inability of the U.S. lawmakers to come to any sort of consensus regarding the country’s latest Covid-19 stimulus package, a deal that many feel is necessary to keep the economic recovery on track. U.S. President Donald Trump accused Democrats on Wednesday of not wanting to negotiate over the package, with Republican and Democratic negotiators trading barbs and blame as negotiations ended without a result for the fifth day. On Tuesday, Richmond Fed President Thomas Barkin stated that the economy could take another downturn if U.S. policymakers fail to provide more financial aid.  He was backed up Wednesday by Federal Reserve Bank of Boston President Eric Rosengren, who said he "strongly" supported taking additional fiscal action to help businesses and households survive the crisis. But, added more spending should be combined with more robust efforts to contain the virus. U.S. deaths caused by Covid-19 topped 166,000 as of Aug. 13, with confirmed cases rising by more than 4% in the past week, according to data collected by Johns Hopkins University. Adding to the problems facing the dollar were the latest inflation figures, with strong numbers from both the consumer and producer sides. With the Federal Reserve already committed to keeping its benchmark rates at these very lows for some time, the pressure is building on U.S. real yields.