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Dollar edges higher, but stays near one-week low

Dollar edges

The Dollar Index traded 0.1% higher at 92.993, after dropping 92.804 on Tuesday for the first time since Aug. 17

The dollar edged higher in early European trade Wednesday, but stayed near a one-week low as confidence rises that the new surge in Covid-19 cases will have a limited impact on the global recovery.

At 0650 GMT, the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 92.993, after dropping 92.804 on Tuesday for the first time since Aug. 17.

EUR/USD inched 0.1% down to 1.1743, after jumping a one-week high of 1.1765 overnight, USD/JPY edged up 0.1% at 109.70, GBP/USD declined 0.1% to 1.3720, and the risk sensitive AUD/USD shed 0.2% to 0.7243, after jumping to 0.7271 on Tuesday, also a one-week high.

The dollar has been struggling over the last couple of days with optimism rising over the ability of the U.S. to cope with the recent surge in Covid-19 cases after the U.S. Food and Drug Administration (FDA) granted full approval to the vaccine developed by Pfizer and BioNTech.

Additionally, the Meishan terminal at China’s second-busiest port reopened Wednesday following a two-week Covid-induced shutdown, raising confidence that the world’s second largest economy has managed to control its coronavirus outbreak.

The main focus this week, though, has been the Federal Reserve’s Jackson Hole Symposium, and with the Covid outbreak clouding the outlook, expectations have dropped that Fed Chair Jerome Powell will indicate a timeline for the tapering of the central bank’s massive bond-buying program.

This week the pendulum has swung pro-risk, but we suspect investors will be reluctant to chase the dollar a lot lower before Jerome Powell’s speech this Friday, said analysts at ING, in a note.

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