2020.12.0120:40:00UTC+00Dollar Loses Ground Against Peers

The U.S. dollar turned weak against most of its peers on Tuesday after having exhibited some strength a day earlier.

Optimism about coronavirus vaccine, hopes about the U.S. Senate agreeing on a coronavirus stimulus, and expectations that the Federal Reserve might announce measures to boost recovery contributed to the dollar's decline.

In testimony before the Senate Banking Committee, Federal Reserve Chair Jerome Powell called the economic outlook "extraordinarily uncertain" and noted it will depend, in large part, on the success of efforts to keep the coronavirus in check.

A report from the Institute for Supply Management showed a slowdown in the pace of growth in U.S. manufacturing activity. The ISM said its manufacturing PMI dropped to 57.5 in November from 59.3 in October, with a reading above 50 indicating growth in the manufacturing sector. Economists had expected the index to dip to 58.0.

A separate report from the Commerce Department showed a bigger than expected increase in construction spending in the month of October.

In testimony before the Senate Banking Committee, Federal Reserve Chair Jerome Powell called the economic outlook "extraordinarily uncertain" and noted it will depend, in large part, on the success of efforts to keep the coronavirus in check.

"The rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months," Powell said. "A full economic recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities."

The dollar index dropped to 91.17, losing about 0.76%.

Against the Euro, the dollar weakened to $1.2070 from Monday's close of $1.1926 on strong euroarea economic data. The euro area manufacturing sector expanded for the fifth successive month in November despite new lockdown measures, final data from IHS Markit showed. The final factory Purchasing Managers' Index fell to 53.8 in November from 54.8 in October.

The Pound Sterling was up nearly 0.75%, firming up to fetch $1.3422 a unit.

The Yen was flat at 104.31 a little while ago, recovering from 104.58 a dollar. The survey results from Jibun bank showed that Japan manufacturing sector continued to contract in November, albeit at a slower pace, with a manufacturing PMI score of 49.0.

That's up from 48.7 in October although it remains beneath the boom-or-bust line of 50 that separates expansion from contraction.

The Aussie was firmer by about 0.35% with the AUD-USD pair quoting at 0.7370. The Reserve Bank of Australia retained its key interest rate and asserted to keep the record low rate for at least three years.

The policy board of the RBA headed by the governor Philip Lowe decided to leave its key rate unchanged at a record low of 0.1%.

Against Swiss franc, the dollar was weaker, fetching CHF 0.8999 a unit, compared to CHF 0.9089 Monday evening.

The Loonie was 1.2938 a dollar, recovering from C$1.3001. Data released by Statistics Canada a little while ago shows Canada's GDP expanded 8.9% in the third quarter of this year. Annualized GDP growth in Canada increased to 40.5% in the third quarter of 2020 from -38.1% in the second quarter of 2020.

The Canadian economy grew 0.8% over a month earlier in September, following a downwardly revised 0.9% expansion in the previous month.

The IHS Markit Canada Manufacturing PMI edged up to 55.8 in November of 2020 from 55.5 in October, pointing to strong factory growth for the 5th month.