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Dollar Rises vs Pound, Euro as Hard Brexit Approaches

Investing.com -- The dollar was close to its highest level in nearly three weeks in early trading in Europe Tuesday, as the rising likelihood of a disruptive and disorderly Brexit hit confidence in both the euro and sterling.

At 03:00 AM ET (0700 GMT), the dollar index, which measures the greenback against a basket of six major currencies, was at 96.920, up some 0.2% from its closing levels on Monday.

The pound had fallen nearly a cent late Monday after lawmakers yet again voted down all proposed alternatives to the government’s negotiated Withdrawal Agreement. By 03:00 AM ET, it had recovered a fraction to $1.3044.

The euro likewise fell under $1.12 for the first time in over three weeks after the round of voting, on fears that a hard Brexit could also badly hit the euro zone economy. Clemens Fuest, President of the Ifo research institute in Munich and a member of the German government’s council of economic advisers, told the radio station Deutschlandfund on Monday that a hard Brexit “could be the straw that breaks the camel’s back” and tips the German economy into recession. By 03:00 AM ET, it was at $1.1197.

Guy Verhofstadt, the EU parliament’s Brexit coordinator, tweeted after the votes that a hard Brexit is now “nearly inevitable”.

The U.K.’s government is set for a crisis meeting this morning in London that will decide whether or not to bring the thrice-rejected Withdrawal Agreement back to the House of Commons for yet another vote on Wednesday, or ask the EU for a lengthy extension to the Brexit deadline.

Elsewhere, the Aussie also fell against the dollar overnight after the Reserve Bank of Australia hinted at a future cut in interest rates, despite leaving them unchanged at its regular policy meeting earlier in the day. The Australian economy has slowed sharply in parallel with China’s in recent months, but got a boost on Tuesday as building approvals rose at their fastest rate in five years.

Finally, the Turkish lira was at 5.5728 to the dollar by mid-morning in Istanbul, after swinging wildly through a 4% range in the previous 24 hours in the wake of Sunday’s municipal election results.

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