Wednesday , January 27 2021

Dollar Slips, Pound Steadies after Decline on Brexit Vote Delay By

© Reuters. – The U.S. dollar slid lower against a currency basket on Tuesday while the pound found some support after a steep selloff in the previous session in the wake of a shock decision by British Prime Minister Theresa May to delay a key vote on Brexit.

The currency, which measures the greenback's strength against a basket of six major currencies, was down from 0.23% to 96.95 by 03:48 AM ET (08:48 AM GMT).

The index surged 0.73% on Monday, rebounding from one-week lows boosted by the steep drop in sterling.

The U.S. dollar has been pressured lower by growing view that the sooner than previously thought.

Treasury note yield has dropped to a three-month low this week, with dovish comments from Fed officials and soft US data further sharpening views on an imminent pause in the tightening cycle.

"Falling US yields will eventually drag the dollar into a downtrend, but probably not at this time," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

"There is not enough demand for the yen, which is less of a safe haven, and the euro, with the political concerns in Europe. And there is of course the pound which is burdened with Brexit problems."

The pound pushed higher, with rising 0.44% to 1.2617 after slumping 1.3% the previous day, when the pair plumbed 1.2507, its lowest since April 2017.

The euro pulled back from three-month highs against the pound, down 0.21% to 0.9021.

Sterling has weakened broadly on Monday after May has called for a vote on whether to approve it negotiated with Brussels following repeated warnings from lawmakers that the scale of the expected defeat could bring down its government.

May's abrupt decision opened a range of possibilities from a no-deal Brexit, a last-minute agreement or a fresh referendum on EU membership.

The euro was higher against the US currency, with rising 0.25% to 1.1382.

The greenback fell against the yen, losing 0.24% to trade at 113.08 after rising 0.6% on Monday.

"It is difficult to draw a very bearish scenario for the dollar as talk of the US economy slipping into recession and the Fed switching to monetary easing from tightening seems too far-fetched at this point," said Koji Fukaya, president of FPG Securities in Tokyo.

"Whenever there is a global risk-off event, the dollar will find demand – as long as risk aversion does not originate in the United States."

– Reuters has contributed to this report

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