Depressed dollar sinks to three-month low

Depressed dollar sinks to three-month low
Janet Yellen, the former Federal Reserve chair and likely new Treasury secretary, is an advocate of more fiscal spending. (Reuters)
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Updated 26 November 2020

Depressed dollar sinks to three-month low

Depressed dollar sinks to three-month low
  • Riskier assets benefit from vaccine hopes and likely US fiscal boost

LONDON: The dollar traded near its lowest levels in nearly three months on Wednesday as progress in developing a novel coronavirus vaccine and expectations for a fiscal boost from a new US government triggered a shift of funds from the greenback to riskier assets.

The US currency traded near a two-month low against the Australian dollar and a two-year low against the New Zealand dollar, both considered barometers of risk sentiment due to their close ties with the global commodities trade.

The greenback recovered some ground by midday in London, however, as some of the early boost to risk appetite faded with stocks in Europe turning negative. The euro fell 0.1 percent to the dollar to $1.18820.

Still, the dollar is expected to continue to fall as progress on a vaccine and the expected choice of former Federal Reserve Chair Janet Yellen as the next US Treasury secretary relieved two big uncertainties for investors.

“From here, the Fed will prove a mere auxiliary to maximize fiscal impact by ensuring cheap funding,” said John Hardy, head of FX strategy at Saxo Bank.

He said the Fed would do this by printing money and keeping rates low across the yield curve.

“On that note, it makes sense to have a former Fed chair helping to maximize that fiscal-monetary coordination under a Biden administration. So the long-term implications of the Yellen nomination are distinctly dollar negative,” Hardy added.

The British pound bought $1.3326, close to its highest in more than two months.

Against the yen, the dollar gained marginally to 104.48.

Research suggesting that a COVID-19 vaccine could be available before the end of the year has sent US stocks surging to record highs and reduced the appeal of holding the dollar as a safe-harbor currency.

Risk appetite has also improved after US President Donald Trump’s administration began cooperating with President-elect Joe Biden’s transition team, and after reports that Yellen, an advocate of more fiscal spending, will take the top job at the Treasury.

The dollar index, pitting the dollar against a basket of six major currencies, was at 92.235 after falling 0.4 percent on Tuesday.

The onshore yuan rose to 6.5739 per dollar on hopes for better Sino-US ties under Biden. Other Asian currencies also edged higher.

The antipodean currencies, which benefited earlier as investors unwound bets for additional monetary stimulus in both countries, eased by midday in London.

Improving risk appetite means the Australian dollar’s next target is its high of $0.7413 on Sept. 1.

The New Zealand dollar, which has rallied 5.5 percent so far this month, is trading just shy of its strongest since June 2018.

Bitcoin, the most popular cryptocurrency, climbed to $19,241 just short of its record of $19,666 from December 2017.


Canadian firm pulls out of Carrefour takeover after France insists ‘No’

Canadian firm pulls out of Carrefour takeover after France insists ‘No’
Updated 33 min 13 sec ago

Canadian firm pulls out of Carrefour takeover after France insists ‘No’

Canadian firm pulls out of Carrefour takeover after France insists ‘No’
  • Carrefour has more than 12,300 stores in more than 30 countries and employs 320,000 people worldwide
  • Canada's Couche-Tard has offered to take over the French supermarket giant for 16 billion euro ($19.5 billion)

PARIS: Canadian convenience store chain Couche-Tard has reportedly pulled out of a multi-billion euro takeover of supermarket giant Carrefour after the French government said it would veto the deal.
Negotiations over the 16 billion euro ($19.5 billion) deal ended after a meeting between the French Minister of the Economy Bruno Le Maire and the founder of Couche-Tard Alain Bouchard, Bloomberg news agency said, citing sources.
French ministers had insisted Friday they would not agree to the takeover because it could jeopardize food security, an even more important consideration given the coronavirus pandemic.
In an attempt to reassure ministers, Bouchard had promised to invest billions in Carrefour, said he would maintain employment for two years and that the group would be listed on the Paris Stock Exchange in parallel with Canada, Bloomberg reported.
Contacted by AFP, neither Couche-Tard nor Carrefour had confirmed the information on Friday evening.
Although talks had stopped, anonymous sources cited by Bloomberg said negotiations could resume if the French government changes its position.
But on Friday, France’s Economy Minister made his choice public, telling BMTV and RMC: “My position is a polite, but clear and definitive ‘No’.”
“Food security is a strategic consideration for our country and one does not just hand over one of the large French distributors like that,” Le Maire said.
“Carrefour is the biggest private sector employer in France with nearly 100,000 employees,” he noted, and the group accounts for 20 percent of the food distribution market in the country.
The French statements have not convinced the Canadian government.
A Canadian federal source said while they could understand concerns over allowing a foreign firm to take over such a large national employer, concerns over food security were unsubstantiated.
“But we cannot accuse a leading Canadian company like Couche-Tard of endangering the food sovereignty of an entire country,” the source, who requested anonymity, told AFP.

'Food sovereignty'
On Wednesday, Couche-Tard submitted a non-binding offer for Carrefour, valuing the group at more than 16 billion euros ($19.5 billion).
Le Maire made clear immediately that he was not in favor of a deal involving “an essential link in food security for the French, of food sovereignty.”
The government’s reaction had caused “surprise” at Carrefour itself, according to sources who said the comments were “premature” given that merger discussions had barely begun.
“We haven’t decided yet whether the interest shown is attractive for us,” one company official said on condition of anonymity earlier in the week.
Carrefour has more than 12,300 stores of various formats in more than 30 countries and in 2019 generated a net profit of 1.3 billion euros ($1.5 billion) on revenue of 80.7 billion euros ($97.4 billion).
It employs 320,000 people worldwide.
Couche-Tard has a worldwide network of more than 14,200 stores and earned a net profit of $2.4 billion on sales of $54 billion in its last complete year.
In the United States and several European countries, as well as in Latin America and southeast Asia, it operates under Circle K and other brands.