The dollar was on track for its worst yearly loss since 2017 on Thursday as expectations of
additional fiscal stimulus and loose Federal Reserve monetary policies lead investors to shun the currency and project further weakness in 2021.
An improving economic outlook as COVID-19 vaccines are rolled out and unprecedented fiscal and monetary stimulus has dimmed the allure of the greenback. The U.S. currency is also suffering from rising fiscal and current account deficits that show no signs of slowing down.
"I expect the dollar to depreciate further over the next few years as the Fed keeps rates at zero whilst maintaining its bloated balance sheet," Kevin Boscher, chief investment officer at asset manager Ravenscroft, told clients. "The magnitude of the twin-deficits dwarfs any other major economy," he said.
The dollar was little changed against a basket of currencies at 89.59, after earlier dropping to 89.52, the lowest since April 2018. It is down more than 7% this year. Trading is thin with many investors out between the Christmas and New Year holidays.
The euro slid 0.16% to $1.2281 after reaching $1.2310 on Wednesday, the highest since April 2018.
The Aussie and kiwi both hit their highest levels since April 2018 with the Aussie surging as high as $0.7743 and the New Zealand dollar reaching $0.7241. The dollar slipped 0.18% against the Japanese yen to 103.07 yen.
It is holding just above a nine-month low of 102.86 yen reached on Dec. 17. Data on Thursday showed that the number of Americans filing first-time claims for unemployment benefits unexpectedly fell last week but remain elevated more than nine months.
U.S. Senate leader Mitch McConnell dealt a likely death blow on Wednesday to President Donald Trump's bid to boost coronavirus aid to Americans, declining to schedule a swift Senate vote on a bill to raise relief checks to $2,000 from $600.
However, U.S. President-elect Joe Biden is expected to push for more measures to support the U.S. economy after he is inaugurated next month. Investors are also watching runoff elections in Georgia for two Senate seats next month that will determine which party controls the Senate.
If the Republicans win one or both of the Georgia seats, they will retain a slim majority in the chamber and can block Biden's legislative goals and judicial nominees. Sterling got a boost after Britain's markets watchdog intervened hours before the country leaves the European Union's single market on Thursday with a partial climbdown on curbs that risked disrupting swaps trades worth billions of euros.
The pound was last up 0.23% at $1.3655, after earlier reaching $1.3686, the highest since May 2018.
Bitcoin reached a record high of $29,300 taking the yearly gain for the world's most popular cryptocurrency past 300% .
The greenback fell 0.24% against the Canadian dollar to a 13-day low of 1.2719 Canadian dollars. The loonie's rise has lagged other currencies including the Aussie and kiwi.
"The lack of direction in oil prices over that last 10 days or so has rendered the Canadian dollar the underperformer of the dollar bloc pack," analysts at Action Economics said in a report on Thursday. (Reuters)