Dollar stays weak amid signs of lagging US economy

LONDON: August 5 The dollar remained weak on Wednesday as a U.S. coronavirus relief package stalled in Congress and U.S. bond yields sank, with investors weighing prospects of further monetary easing to support the economy. White House negotiators and congressional Democrats are trying to reach a deal on a package by the end of this week, ad Treasury Secretary Steven Mnuchin said on Tuesday that progress had been made on key components of the bill.
A hardening perception that the U.S. economic recovery is lagging Europe has buttressed the euro, pushing it above $1.19 in the last couple of days.
Early on Wednesday, the common currency traded up 0.1% at $1.1815 EUR=EBS.
Most other major currencies were also up against the dollar, pushing its index towards last week’s two-year low of 92.53. It traded at 93.05 =USD as the price for gold surpassed $2,000, a record high XAU=.
“The ongoing fall in U.S. real yields is helping to lift the price of gold and weakening the U.S. dollar,” said Lee Hardman, currency analyst at MUFG, adding that the bank had lowered its forecasts for the dollar on the assumption that the Federal Reserve will loosen policy further this year.
U.S. 10-year Treasury yields were close to the five-month low they hit on Tuesday US10YT=RR.
Traders will be watching the euro zone Markit Services final Purchasing Managers’ Index (PMI) at 0800 GMT, followed by retail sales at 0900 GMT.
Economists polled by Reuters see services and composite PMIs confirmed at 55.1 and 54.8 respectively.
Final U.S. PMI numbers are also due later in the day.
Growth in China’s services sector showed signs of a slowdown in July from a ten-year high the previous month, as new export business fell and job losses continued, a sister survey showed on Wednesday, pointing to cracks in the sector’s post-COVID recovery.