FOREX-Euro near three-month high as dollar takes a hit; Bitcoin at new high

Olga Cotaga
·3-min read

* New Zealand dollar set to reach more than two-year high

* Commodity-linked currencies gains vs U.S. dollar

* Canadian dollar shy of a two-year high

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E (Adds latest news, new comment, updates prices)

By Olga Cotaga

LONDON, Dec 1 (Reuters) - The euro was close to a three-month high on Tuesday as the U.S. dollar fell on expectations of more monetary stimulus from the United States and a strengthening recovery elsewhere pushed up riskier currencies.

One of the currencies to watch was the New Zealand dollar, which was on course to reach its highest since June 2018.

Bitcoin reached a record high of $19,918. Traders were watching for the next hurdle of $20,000 for the cryptocurrency.

Investors are short dollars as optimism about promising vaccine trials drives buying of riskier currencies and higher- yielding assets outside the United States.

Worries about rising coronavirus cases have not provided the dollar with much support. Speculation is growing that the Federal Reserve will act to support the economy through a tough winter before vaccinations become available.

The Fed meets to set policy on Dec. 15 and 16. Before then - on Tuesday and Wednesday - Fed Chair Jerome Powell will appear before Congress, and his remarks will be closely watched for any clues as to the Fed's next moves.

Powell and Treasury Secretary Steven Mnuchin will testify on the CARES Act, under which Congress made $2 trillion available to the Treasury as coronavirus aid, a large portion of which was aimed to support the FOMC’s lending programs.

Less than two weeks ago, Mnuchin cut off the programs, requesting that the Fed return unused funds and declined any extension.

"With all that in mind, it will be interesting to see what the two officials have to say on the matter, and whether Powell will hint at other ways in stimulating the U.S, economy from a monetary policy front," said Charalambos Pissouros, senior market analyst at JFD Group.

"The U.S. government has yet to agree with Congress on a new fiscal package, something that makes the case for the Fed to act in December more likely," Pissouros said. If that happens, "the U.S. dollar and other safe havens could come under selling pressure."

Euro/dollar was up 0.3% at $1.1964, close to $1.2004, its highest since Sept. 1. An index that tracks the dollar against a basket of currencies was down 0.2% at 91.79 .

Euro zone inflation remained in negative territory for the fourth straight month in November, reinforcing European Central Bank concerns that the drop in prices may persist as deflationary forces intensify amid a deep recession.

"The euro won't go up fast," said Kit Juckes, macro strategist at Societe Generale. It "will only do so as the dollar falls more broadly."

The euro zone "will likely lag other countries which aren't standing so firmly in the way of currency appreciation. The Nokkie and the Swedish crown ought to do better than the euro next year," Juckes said.

The Norwegian crown rose 0.4% against the dollar to trade at 8.8590. The Swedish crown rose 0.5% at 8.5345. Both gained versus the euro, too, albeit by a smaller amount.

The British pound rose 0.2% against the dollar to $1.3347, after reaching a three-month high of $1.3409 earlier in the session.

The Australian dollar inched up 0.1% at 0.7349. The New Zealand dollar was close to breaking a more than two-year high above 0.7051, last rising 0.3% at 0.7029.

The Canadian dollar rose 0.3% at 1.2971 against its U.S. counterpart, shy of a two-year high. (Reporting by Olga Cotaga, editing by Larry King)