Dollar Weakens as Yellen Boosts Risk Appetite

Wednesday,   20-Jan-2021   02:05 PM (IST)

The dollar weakened in early European trade Wednesday, with risk sentiment on the rise after comments Janet Yellen, Joe Biden's nominee for Treasury Secretary, pointed towards substantial additional fiscal spending t reflate the U.S. economy. At 3:05 AM ET (0805 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.2% at 90.278. USD/JPY was down 0.1% at 103.75, ahead of the Bank of Japan’s latest rate-setting meeting on Thursday. EUR/USD rose 0.2% to 1.2154, GBP/USD climbed 0.3% to 1.3670, while the risk-sensitive AUD/USD was up 0.6% at 0.7736. Yellen appeared Tuesday in front of the Senate Finance Committee as part of her confirmation hearing, and the former Federal Reserve head urged Congress to “act big” on Covid-19 relief. She defended the need for President-elect Joe Biden’s proposed $1.9 trillion relief package to revive a flagging economy and protect itself against long-term scarring from the impact of the coronavirus pandemic. Opposition to the plan from Republican lawmakers over its cost given the already sizable budget deficit, but Yellen stated that its benefits will far exceed the costs over the long term. Attention now turns to Joe Biden’s inauguration as U.S. President in Washington, at 12 PM ET (1700 GMT), amid a strong security presence given concerns about possible civil unrest. In Italy, Prime Minister Giuseppe Conte won a confidence vote in the Senate late Tuesday, following on from Monday’s victory in the House, after the departure of a junior member of his coalition. However, he will continue without a solid majority in the Senate. The European Central Bank’s latest rate-setting meeting on Thursday looms large, but changes to its monetary policy are unlikely given it delivered a hefty easing package only in December.