© Reuters.

By Peter Nurse

Investing.com – The dollar edged lower in early European trade Friday, after earlier hitting a two-month high, as renewed talk of additional U.S. stimulus eased investors’ concerns about an economic recovery.

At 2:50 AM ET (0650 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 94.317, after climbing to a two-month high of 94.601 in Thursday’s U.S session.

Additionally, gained 0.1% to 1.1674, after having hit a two-month low of $1.1626 on Thursday, while was down 0.1% at 105.30. rose 0.2% at 1.2771, helped by U.K. Chancellor of the Exchequer Rishi Sunak’s scaled-back support for workers hit by Covid-19’s second wave.

Talk that the Democrats in the U.S. House of Representatives were working on a $2.2 trillion coronavirus stimulus package that could be voted on next week helped boost risk sentiment. This reversed earlier gains by the greenback after disappointing had pointed to a stagnating economic recovery.

That said, just because talks could resume between House of Representatives Speaker Nancy Pelosi and U.S. Treasury Secretary Steven Mnuchin doesn’t mean any form of compromise is likely. Particularly with trust between the two sides in short supply in the wake of President Donald Trump refusing to commit to a peaceful transfer of power if he lost the election.

“Downgrades to growth expectations, the lack of imminent fiscal stimulus and U.S. election uncertainty is not the mix under which cyclical FX would thrive. In the near-term, we think USD and the safe-haven JPY are likely to outperform,” wrote analysts at ING, in a research note.

Elsewhere, dropped 0.1% to 6.8194, with the yuan posting gains after Russell announced it will add Chinese government bonds to its flagship World Government Bond Index starting in 2021.

“I think this is another important landmark in China’s … internationalization of their domestic financial markets,” Ben Powell, BlackRock (NYSE:) Investment Institute’s chief investment strategist for Asia Pacific said on CNBC earlier Friday.

Additionally, fell 1.3% to 7.5196, with the lira extending gains following a jump from Thursday’s record low after the country’s central bank unexpectedly hiked interest rates by 200 basis points.

“Exchange rate developments will likely remain one of the key determinants of the CBT’s policy in the period ahead, though the hike should support the Turkish lira in the near term,” said ING. 


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