U.S.$ DOWN

REUTERS - JUNE 16, 2020 - The dollar slipped and riskier currencies rallied on Tuesday as the U.S. Federal Reserve prepared to start its corporate bond buying scheme, while a report flagging the possibility of more fiscal stimulus helped to underpin investor sentiment.

After a 2.1% rise so far this month, the euro was heading back to near $1.15, this year’s high.

The Fed said it would start buying corporate debt on Tuesday as part of an already announced stimulus scheme, and launched its Main Street Lending Program for businesses.

The move boosted confidence across asset classes and underpinned risk-sensitive currencies, including the Australian and New Zealand dollars.

Investor sentiment was further lifted by a Bloomberg News report that President Donald Trump’s administration was considering a nearly $1 trillion infrastructure programme to boost the economy, citing anonymous sources.

Taken together, the news reinforced a belief authorities will do what it takes to get the world’s biggest economy back on track.

“As long as governments around the rest of the world continue to ease their lockdown measures, and as long as data continues to suggest that the deep economic wounds due to the fast spreading of the coronavirus are behind us, we would see decent chances for risk assets to stay supported,” Charalambos Pissouros, senior market analyst at JFD Group, said.

Fed Chairman Jerome Powell is due to testify before the Senate Banking Committee on Tuesday. He will deliver the same testimony on Wednesday before the House Financial Services Committee.

Investors will be listening for hints the Fed is willing to do more.

“If so, equities and risk-linked currencies are likely to continue their journey north, as investors keep diverting their capital out of safe havens, the likes of the U.S. dollar, the yen and the franc,” Pissouros said.

The euro was up 0.2% at $1.1347, recovering from falls after traders feared a second wave of coronavirus and decided to cash in on any gains.

Beijing banned some people from leaving the Chinese capital and halted transportation services on Tuesday to try to contain a fresh coronavirus outbreak.

Global cases of the novel coronavirus have reached over 8 million. Deaths stand at over 434,000 and have doubled in seven weeks.

The dollar/yen was neutral at 107.35.

The Bank of Japan kept monetary settings steady on Tuesday and stuck to its view the economy will gradually recover from the coronavirus pandemic, signalling it has taken enough steps to support growth for now.

Market participants are awaiting the German ZEW economic survey expectations for June at 0900 GMT and U.S. retail sales and industrial production later in the day.

Elsewhere, sterling was up 0.2% both against the dollar and the euro at $1.2630 and 89.73 pence respectively.