Greenback weakens as Yellen will increase danger urge for food

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From Peter Nurse – The dollar weakened in early European trading on Wednesday, with risk sentiment rising after comments. Janet Yellen, Joe Biden's candidate for Treasury Secretary, pointed to significant additional budget spending to get the US economy going again.

At 3:05 a.m. CET (0805 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, fell 0.2% to 90.278.

was down 0.1% to 103.75 before the Bank of Japan held its final rate-fixing meeting on Thursday. increased 0.2% to 1.2154, increased 0.3% to 1.3670, while risk sensitivity increased 0.6% to 0.7736.

Yellen appeared Tuesday for her confirmation hearing before the Senate Treasury Committee, and the former head of the Federal Reserve urged Congress to "go big" on Covid-19 relief.

She defended the need for Joe Biden's proposed $ 1.9 trillion aid package to revive a flagging economy and protect against long-term scars from the effects of the coronavirus pandemic.

Republican lawmakers rejected the plan given the already sizeable budget deficit, but Yellen said its benefits will far outweigh the costs in the long run.

"Further fiscal stimulus, along with a non-reactive Federal Reserve, should make US front-end real interest rates even more negative and, of course, weigh on the dollar," said ING analysts in a research note.

Attention is now turning to Joe Biden's inauguration as US President in Washington at 12:00 noon CET (1700 GMT) amid a heavy security presence amid concerns over potential civil unrest.

In Italy, Prime Minister Giuseppe Conte won a Senate vote of confidence late Tuesday after a junior member of his coalition left parliament on Monday. However, he will continue without a fixed majority in the Senate.

While this is unlikely to completely end Italy's political uncertainty, it suggests that "the impact on the euro will remain limited and risk premiums in the currency will rise only limited," added ING.

The latest state of the European Central Bank on Thursday is imminent, but changes to its monetary policy are unlikely as it did not present a hefty easing package until December.

"The focus of Thursday's ECB meeting will be on the comments from (President Christine) Lagarde on the future of bond buying and the disagreement between hawks and pigeons," said Jan von Gerich, an analyst at Nordea.

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