The dollar paused its climb on Friday, while the euro wallowed near its four-week low against the greenback after the European Central Bank signalled further monetary easing by the end of the year.
Overnight, the euro’s decline in addition to U.S. data helped lift the greenback to a near four-week high against a basket of currencies.
The ECB kept interest rates steady on Thursday but committed to contain the growing fallout from a second wave of coronavirus infections, saying it would hone its response by its December meeting, as widely expected by the market.
“We agreed, all of us, that it was necessary to take action and therefore to recalibrate our instruments at our next Governing Council meeting,” ECB President Christine Lagarde told a news conference. Daisuke Karakama, chief market economist at Mizuho Bank, said that a build-up of expectations for ECB’s monetary easing may cause risks such as a dollar-buying spree or the euro to fall further.
“It’d be fine if the ECB can exceed market expectation… but now that they’ve made an announcement in advance, there’s a risk if (the December meeting) turns out to be underwhelming,” Karakama said.
The euro slightly firmed to $1.1679 in Asia, after hitting a four-week low of $1.1650 in U.S. trade overnight.
Against the yen, the common currency slightly eased to 121.79 yen.
Data on Thursday showed the U.S. economy grew at a record pace for the third quarter and an improving trend in jobless claims, while scars from the coronavirus recession still lingered.
U.S. gross domestic product rebounded at a 33.1% annualised rate last quarter, according to an advance estimate on Thursday, the fastest pace since the government started keeping records in 1947. Separately, a report showed 751,000 people in the United States filed for state unemployment benefits in the week ended Oct. 24, compared with 791,000 the previous period.
The dollar index was flat at 93.889 but sat within reach of Thursday’s four-week high at 93.916, poised to mark the biggest weekly gains since the end of September.
Still, uncertainty surrounding Tuesday’s U.S. presidential election and coronavirus fears continue to loom over market.
“As dollars were bought mostly against the euro for the past two days, there’s a move to sell the greenback back ahead of the election,” said Makoto Noji, chief FX strategist at SMBC Nikko.
Global daily coronavirus cases rose by over 500,000 for the first time, with France and Germany going back into coronavirus lockdowns next week.
In the United States, a single-day record was set on Thursday with over 91,000 new coronavirus cases, as hospitalisations hit new highs in many states, according to a Reuters tally.
Data due later on Friday include euro zone’s third-quarter gross domestic product and October inflation, while the U.S. awaits September personal consumption and expenditures as well as the Chicago PMI.
The Chinese yuan firmed against the greenback as China’s leaders endorsed a new five-year plan to drive sustained economic growth, which markets believe will require a stronger currency.
The greenback edged lower against the Japanese yen at 104.30 yen, after rallying overnight from a five-week trough as it benefited from a rebound in U.S. treasury yields and broad dollar buying.
Sterling changed hands at $1.2906, undermined by a lack of Brexit-related headlines as London and the European Union have just two months to reach a post-Brexit trade agreement.
Among antipodean currencies, the Aussie last sat at $0.7032, a fraction above a three-month low of $0.7002 marked overnight.
Meanwhile, the kiwi held steady, last fetching 0.6619 per dollar.