Dollar strengthens as vaccine, stimulus optimism dented

NEW YORK (Reuters) – The U.S. dollar strengthened on Tuesday as investors turned cautious after a Johnson & Johnson Covid-19 study was paused while a gauge of inflation rose for a fourth straight month.

Major equity averages were lower, partly due to a decline in J&J shares after the company paused due to an unexplained illness in a participant, dampening optimism a vaccine was on the horizon.

U.S. consumer prices rose 0.2% in September, matching expectations, for a fourth straight monthly climb, though the pace has slowed amid considerable slack in the economy as it gradually recovers from the COVID-19 recession.

The dollar index =USD rose 0.416% against a basket of other currencies, putting it on track for its biggest daily percentage gain in three weeks.

The U.S. currency’s safe-haven appeal has been curbed by growing expectations former U.S. Vice President Joe Biden’s win in the Nov. 3 presidential election would bring large stimulus for the pandemic-hit economy, bolstering the stock market and investor risk appetite.

The greenback has held within a range of about 2% over the past three weeks as talks on a fiscal deal have progressed in fits and starts. On Tuesday, U.S. House Speaker Nancy Pelosi said the offer President Donald Trump recently made on a package after he scrapped talks fell far short of what the American people need, but she still hopes a deal can be reached.

Sterling GBP= was last trading at $1.2987, down 0.59%, after climbing above the $1.30 mark for the first time in a month on Friday as Britain’s unemployment rate rose by more than expected to 4.5% in the three months to August.

In addition, as a deadline looms, British Prime Minister Boris Johnson told his top cabinet ministers on Tuesday he wanted a free trade deal with the European Union on the right terms but ending the year without one held “no fear.”