Dollar tumbles on risk sentiment following US stimulus optimism

The greenback fell against majority of its peers and hit a fresh 2-1/2 year trough on Tuesday on return of risk sentiment due to optimism that U.S. lawmakers would soon agree on a covid-19 relief package together with a rally in U.S. stocks. Sterling rallied across the board on news that a Brexit deal could soon be reached.  
  
Reuters reported a bipartisan group of U.S. senators and members of the House of Representatives on Tuesday proposed a $908 billion COVID relief bill that would fund measures through March 31, including $228 billion in additional paycheck protection program funds for hotels, restaurants, other small businesses.    State and local governments would receive direct aid under the bipartisan bill, the lawmakers said. Senator Mitt Romney, a Republican, said the plan contains $560 billion in "repurposed" funding from the CARES Act enacted in March.  
  
Versus the Japanese yen, although dollar briefly gained above Monday's 104.40 high to 104.46 in Asian morning, price retreated to 104.19 in European morning. However, the pair then rose to an session highs of 104.57 in New York due partly to cross-selling in jpy before retreating.  
  
The single currency found renewed buying at 1.1926 in Australia after Monday's selloff from 1.2003 to 1.1925 and rebounded to 1.1959 in Asia morning. The pair then ratcheted higher to 1.1985 in European morning on cross buying in euro before rallying above September's 2-year peak at 1.2011 to 1.2076 in New York on return of risk sentiment.  
  
Reuters reported the euro zone IHS Markit's final Manufacturing Purchasing Managers' Index (PMI) fell to 53.8 in November from October's 54.8 but was ahead of the 53.6 flash estimate.     And the European Union member states will soon agree on a disputed rule-of-law mechanism linked to the bloc's recovery plan as all countries, including Poland and Hungary, would benefit from its approval, German Finance Minister Olaf Scholz said on Tuesday.  
  
The British pound went through a volatile session. Although cable rose steadily from 1.3322 in Australia and then rallied to 1.3407 in European morning, price erased intra-day gains and tumbled to session lows at 1.3316 on Brexit concerns. However, the pair jumped in New York and rose above 1.3407 to a near 3-month peak at 1.3442 after Times Radio said that Brexit trade deal talks have entered the "tunnel" stage of negotiations.  
  
Reuters reported British Prime Minister Boris Johnson's Brexit supremo, Michael Gove, said on Tuesday that there was a chance that Brexit trade talks may end without a deal, the nightmare finale to the five-year Brexit crisis.      "We have intensified the negotiation process, but it's important that the EU also lives up to its responsibilities as well," Chancellor of the Duchy of Lancaster Gove told ITV's Good Morning Britain.     Asked whether a no deal was closer than anyone would admit, he said: "I think it's certainly the case that there is a chance that we may not get a negotiated outcome, that's why it's important business prepares for all eventualities, but I very much want a deal and I believe that we can secure one."   
Reuters also revealed that the British IHS Markit/CIPS Purchasing Managers' Index rose to 55.6 in November from 53.7 in October, its highest since December 2017 and above an earlier flash reading of 55.2, bucking a gloomier picture from other sectors hit harder by COVID.   
  
Data to be released on Wednesday :  
  
New Zealand terms of trade, import prices export prices, UK BRC shop price index, Australia GDP, Japan consumer confidence, Germany retail sales, Swiss CPI, Italy unemployment rate, EU producer price index, unemployment rate, Canada labour productivity rate and U.S. MBA mortgage applications, ADP employment change.