SYDNEY- The dollar ended 2020 in a downward spiral with investors wagering a global economic recovery will suck money into riskier assets even as the US has to borrow ever more to fund its swelling twin deficits.
The euro stood at $1.2291, having hit its highest since April 2018 with a gain of almost 10 percent for the year. The next stops for the bull train are $1.2413 and $1.2476, on the way to the 2018 peak at $1.2555.
The dollar was lying at 103.15 yen, but managed to hold above the December low of 102.86.
It also fell against the Chinese yuan, breachingh 6.4900 for the first time since mid-2018, though Chinese banks were later reported to be buying dollars to limit the drop.
Sterling held gains after lawmakers approved a post-Brexit trade deal with the European Union, stretching as far as $1.3641 a level unseen since May 2018.
Against a basket of currencies the dollar had sunk to 89.643, having touched it lowest since April 2018. That left it down 7.2 percent on the year, and no less than 13 percent on the 102.99 peak hit during the market mayhem of mid-March.
The next target is 89.277 and then 88.251, which was the absolute low in 2018.
The prospect of a brighter 2021 has lessened the need for the safe-haven dollar, while burnishing the attraction of riskier assets especially in emerging markets.
Bears have also resurrected the “twin deficits” excuse for shorting the dollar – that the explosion in the budget and trade deficits means more dollars being printed and moved abroad.
From this perspective the new US stimulus bill is dollar negative as it adds to the nation’s debt, and President-elect Joe Biden is promising a lot more next year.