TOKYO- The dollar held gains against most currencies on Wednesday after US President Donald Trump abruptly cancelled talks on economic stimulus with Democrat lawmakers, heightening demand for safe-haven assets.
Currencies had only just regained a sense of calm after Trump returned to the White House from hospital, where he received treatment for the coronavirus.
Trump’s surprise decision to call off stimulus talks until after the Nov. 3 presidential election increases downside risks for an already shaky US economy.
“The reaction is a type of risk-off trade to buy the dollar and the yen against other currencies,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
“Without additional stimulus, the US economy will slow and the global economy will slow.”
The dollar was last quoted at $1.1729 per euro, holding onto a 0.4 percent gain in the previous session.
The British pound was quoted at $1.2881 after skidding by 0.86 percent on Tuesday as optimism about Britain’s trade negotiations with the European Union failed to shield sterling from the dollar’s advance.
The dollar bought 0.9185 Swiss franc after rising 0.3 percent in the previous session.
Trump, still being treated for COVID-19, on Tuesday turned to Twitter to break off talks with Democrats on an aid package even though US virus cases are rising.
Highlighting the peril, Federal Reserve Chair Jerome Powell on Tuesday warned that the US economy could slip into a downward spiral if the coronavirus is not effectively controlled and called for more economic assistance.
Traders will look to minutes from the Fed’s most recent meeting and comments from several Fed speakers later Wednesday for further signs of how central bankers view the outlook.
The increased risk aversion, however, did not move the dollar against the yen, which was last quoted at 105.67, because both currencies tend to be bought during times of uncertainty, analysts say.