After Biden Inauguration Dollar Weakens

The dollar started weaker on Thursday with riskier currencies in demand amid increased hopes for hefty U.S. stimulus measures as President Joe Biden moved into the White House. The Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.2% at 90.297, declining for a third day since touching a near one-month high on Monday.

USD/JPY was down 0.1% at 103.41, after the Bank of Japan kept monetary policy unchanged earlier Thursday while revising up its economic forecast for next fiscal year. GBP/ USD  climbed 0.3% to 1.3695, while the risk-sensitive AUD/USD was up 0.2% at 0.7761, after Australia reported another strong rise in employment in December.

On Wednesday Biden was sworn in as 46th president of the United States, and traders are seeing the change in administration as increasing the chances of increased stimulus given the incoming president has already proposed a $1.9 trillion Covid-19 relief bill.

This year the dollar started strong as U.S. Treasury yields rose on the back of expected greater borrowing to fund additional stimulus. This attitude has changed with Federal Reserve members keen to point out that policy will remain ultra-loose for years to come, something that will perpetuate the U.S.’s large twin deficits.  Later throughout the day, the weekly jobless claims numbers are scheduled to be released. These are expected to show almost one million new people claiming benefits, while continuing claims are seen at 5.4 million.

As for the other part of the world,  the European Central Bank holds its latest rate settling meeting later Thursday, although changes to its monetary policy are unlikely given it delivered a hefty easing package only in December.

“With the change to policy instruments during the December meeting and what we see as a modest upside risk to the current ECB inflation forecast … the scope for a surprise, which could meaningfully affect the euro, is limited in our view,” said analysts at ING, in a research note.