Fed debt buying drives demand for risk at the dollar’s expense

Dollar Retreats Over Glow From Positive Europe Data

By Administrator_India

Capital Sands

The dollar nursed losses on Tuesday, after the U.S. Federal Reserve announced it would begin broad buying of corporate debt, boosting investor sentiment and appetite for riskier currencies.

The Fed said it will start purchasing a diversified range of investment grade U.S. corporate bonds on Tuesday in a bid to secure companies’ access to cash and ensure credit market liquidity amid the COVID-19 pandemic.

The announcement dispelled, for now, concerns about a second wave of coronavirus infections that had weighed on the mood in the previous trading session.

This drove the risk-sensitive Australian dollar, the New Zealand dollar and stocks higher, while safe-haven Treasuries and the greenback fell.

Against a basket of currencies the dollar was steady at 96.546, almost 1% below Monday’s high of 97.396.

The risk-sensitive Australian dollar sits more than 2% above a two-week low hit on Monday, and rose 0.6% to $0.6968 on Tuesday.

The Reserve Bank of Australia reiterated in minutes from its June meeting that the national economic downturn may not be as bad as first feared.

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