Reuters: Bitcoin hits record high as dollar plunges on stimulus package

(Reuters, New York, December 1, 2020 ) - The dollar fell to its lowest level in more than 2-1/2 years on Tuesday as investors expressed concerns about plans for further disastrous U.S. fiscal stimulus and the prospect of a solid global economic recovery.

Photo: Reuters/Dado Ruvic

The dollar fell further on news of the proposed coronavirus stimulus bill, while U.S. Treasury Secretary Steve Mnuchin and House Speaker Nancy Pelosi held talks on Tuesday on resuming stimulus legislation.

The proposed $908 billion relief bill would fund a variety of economic measures through March 31, including $228 billion in additional Paycheck Protection Funds for hotels, restaurants and other small businesses.

"Traders are looking for any reason to increase their hedging risk, and that comes at the expense of the dollar," said John Doyle, vice president of trading at Washington firm Tempus.

He added: “When you get a long-awaited stimulus report that leads to a bipartisan agreement, that’s another reason to hedge your risk and sell the dollar.”

Pelosi said Tuesday that Mnuchin would review the bipartisan Senate proposal, as well as her and Sen. Charles Schumer's coronavirus relief plan.

Currencies that tend to gain ground in times of risk appetite, such as the euro, sterling and the Australian and New Zealand dollars, all rose against the dollar.

The euro and New Zealand dollar both hit two-year highs.

Bitcoin was also affected by the move, hitting a record high of nearly $20,000 before falling 3.8% to $18,961. The dollar index fell 0.7% to 91.318 in midday trading, hitting 91.263, the lowest level since late April 2018. The euro hit a two-year high of $1.2055 against the dollar and was last trading up 1% at $1.2049.

"In the short to medium term, the technical arguments supporting further euro gains are compelling," Scotiabank said in a research note.

“November price action is generally bullish for the euro, with a breakout from (second-half) consolidation suggesting potential for gains towards $1.25-1.26.”

Sterling rose to a three-month high against the dollar after Times Radio said a Brexit trade deal had entered the "tunnel" phase of negotiations , a secretive, make-or-break final stage of intense negotiations. Sterling was last up 0.7% at $1.3410.

Concerns about rising coronavirus cases haven’t provided much safe-haven support for the dollar. Speculation is growing that the Federal Reserve will take action to support the economy through a winter when vaccines are difficult to administer. That would further weigh on the dollar.

The Fed will meet to set policy on Dec. 15-16.

Federal Reserve Chairman Jerome Powell and Treasury's Mnuchin also urged Congress on Tuesday to provide more help to small businesses amid the coronavirus pandemic, expressing concern that a vaccine may not be released in time to prevent its failure.

The New Zealand dollar hit its highest level since June 2018 and was last up 0.7% at $0.7055, while the Canadian dollar gained 0.4% to C$1.2954 after data showed Canada's economy grew at an annualized rate of 40.5% in the third quarter, rebounding from a historic drop in the second quarter.

Figure: Global foreign exchange rates in 2020

On December 3, the world's first Bitcoin mining pool Slush Pool officially tweeted that at the request of miners, in the block with a height of 659678 mined at 23:51 on the evening of December 2, "Reuters reported on December 1, 2020 that the US dollar plummeted due to the US economic stimulus plan and Bitcoin hit a record high" has been permanently on the chain.