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Euro and Australian dollar gain as US transition goes ahead

Rolled Euro banknotes are placed on US Dollar banknotes in this illustration taken May 26, 2020. (Photo by Reuters)

Risk-oriented currencies including the Australian dollar and the euro rose on Tuesday after US President Donald Trump accepted the start of a transition to a Biden regime that may include former Federal Reserve Chair Janet Yellen as Treasury secretary.

The New Zealand dollar was among the major gainers, rising as much as 0.9% to a two-year high of $0.6985, after the country's government sought advice from the central bank on how it could help stabilize property prices, prompting investors to unwind some bets of more monetary easing.

Trump gave the head of the General Services Administration the go-ahead to proceed with a transition to a government led by President-elect Joe Biden despite plans to continue with legal challenges.

Democratic allies to the Biden campaign said Yellen is expected to be nominated to become Treasury Secretary, heartening investors as she has called for increased government spending to lift the economy out of a coronavirus induced recession.

"That should be a positive appointment from the market’s point of view, as she is expected to pursue conventional policies," Commerzbank strategists said in a daily note.

"And as far as the fiscal package is concerned, she is likely to listen to the Fed's demands and try and push a package as much as possible."

Yellen has called for the opening of fiscal spending taps to revive an economy wrecked by the coronavirus pandemic and would be the first person to head the Treasury, the Fed and the White House Council of Economic Advisers.

In contrast, US Treasury Secretary Steven Mnuchin last week let some of the Fed's lending programmes expire at the end of this year, opening a feud with the central bank, which said those emergency facilities are important to support the economy.

Against a basket of other major currencies, the greenback edged 0.12% lower to 92.396, hovering just above a near three-month low of 92.013 hit on Monday. The Australian dollar ticked up 0.4% to $0.7313 while the euro rose 0.1% at $1.1852.

The dollar also struggled after AstraZeneca further lifted investors' appetite for risk by saying its COVID-19 vaccine could be about 90% effective and it would prepare to submit data to authorities around the world that have a framework for conditional or early approval.

(Source: Reuters)

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