U.S. Dollar Strengthens On Stimulus Uncertainty

The U.S. dollar advanced against its major counterparts in the Asian session on Tuesday, as worries over a delay in the U.S. stimulus package and a surge in coronavirus cases around the world lifted the demand of the safe-haven assets.

The proposed $1.9 trillion stimulus package faces obstacles in the Senate, as several GOP leaders expressed opposition about the size of the measure.

With the Democratic party holding only a slim majority in the Senate, there are concerns about how much aid can be approved.

The Fed meeting will begin later today, with investors widely expecting it to keep its main interest rate unchanged.

The Fed funds rate stands at 0-0.25 percent and the quantitative easing program at US$120 billion per month.

The greenback spiked up to 5-day highs of 0.8896 against the franc and 1.2108 against the euro, up from its early lows of 0.8875 and 1.2146, respectively. The greenback is likely to find resistance around 0.90 against the franc and 1.18 against the euro.

After a fall to 1.3679 at 6:15 pm ET, the greenback rose to a 1-week high of 1.3610 against the pound. On the upside, 1.34 is likely seen as its next resistance level.

The greenback bounced off from its earlier lows of 0.7202 against the kiwi, 0.7720 against the aussie and 1.2730 against the loonie and climbed to a 4-day high of 0.7167 and 8-day highs of 0.7669 and 1.2782, respectively. The greenback is seen finding resistance around 0.70 against the kiwi, 0.75 against the aussie and 1.30 against the loonie.

The greenback reversed from an early 4-day low of 103.66 against the yen, with the pair trading at 103.83. If the dollar climbs further, 105.00 is likely seen as its next resistance level.

Minutes from the Bank of Japan's meeting on December 17 and 18 showed that members of the board agreed that the country's economy was continuing to pick up modestly in the aftermath of the Covid-19 pandemic.

The members added that they will continue to support easing until the inflation target of 2 percent has been reached, the minutes said, and they did not rule out the possibility of further easing in light of the economic stresses caused by the pandemic.

U.S. FHFA's house price index and S&P/Case-Shiller home price index for November and consumer confidence index for January will be featured in the New York session.