A rebound in the dollar faltered on Tuesday as political wrangling over a U.S. relief plan and the gloomy economic outlook kept investors shy of the currency.
After its worst month in a decade in July the greenback started August on a firm note as some investors trimmed their short positions, pushing the currency as high as $1.1695 per euro on Monday, 1.8% above last week’s two-year low.
However, that only carried it so far, and it settled back to $1.1766 in Asia on Tuesday, while the yen and other majors also lifted from troughs. The Aussie edged ahead to $0.7134 after the central bank offered no surprises by holding policy steady.
Despite an encouraging slowdown in new virus cases and better-than-expected manufacturing data, investors are reserving judgment on whether a U.S. economy with 30 million people out of work can really lead the world’s recovery.
Top Democrats in Congress and White House negotiators on Monday said they had made headway in talks on the latest coronavirus relief bill, though an expired $600-per-week unemployment benefit remains a sticking point.
A better-than-expected expansion in the Institute for Supply Management’s U.S. manufacturing index was a bright spot for the dollar overnight. But it came with a warning as output remains far below pre-virus levels and the employment index was below forecasts, at a still contractionary 44.3.
The United States had a second straight week of slowing infections last week, but a fourth week in a row of rising deaths, a Reuters analysis found, as new hotspots emerge there and around the globe. Cases are on the march again in Europe while Australia’s second-biggest city of Melbourne announced a curfew and fresh restrictions on movement to suppress an outbreak there.
Elsewhere the yen was stable at 106.04 per dollar while the pound hung on to most of July’s gains on the greenback at $1.3079. The New Zealand dollar was flat at $0.6612. Elevated Sino-U.S. tension kept the yuan on the weaker side of 7-per-dollar at 6.9806 in onshore trade.