The dollar edged higher while the euro gave up earlier gains on Tuesday in choppy trading, as risk appetite soured after a top U.S. Senate official said negotiations in Congress on an additional stimulus package for the virus pandemic have not progressed.
Other safe havens such as the yen and Swiss franc attracted some bids as well, as they cut their losses against the dollar.
U.S. Senate Republican leader Mitch McConnell said White House negotiators have not spoken on Tuesday with Democratic leaders in Congress on coronavirus aid legislation after talks broke down last week.
Wall Street shares turned lower after McConnell's remarks, while U.S. Treasury prices pared losses.
"We're going to be stuck here for a while. And that's a big problem," said Marc Chandler, chief market strategist, at Bannockburn Forex in New York, commenting on the stalemate.
"What's going to happen to people who are not going to cut the $600 checks? Without that, it means we lose income and we lose consumption," he added.
In late afternoon trading, the dollar index <=USD> rose 0.1% to 93.709, hitting a one-week high hit earlier in the session.
The euro slipped to $1.1733 <EUR=EBS>. It earlier hit a session high above $1.18 after the ZEW survey of economic sentiment rose to 71.5 from 59.3 the previous month, far exceeding a forecast for 58.0 in a Reuters poll of economists.
(Graphic: Eurodollar - https://fingfx.thomsonreuters.com/gfx/mkt/dgkvldymavb/Eurodollar.png)
The dollar hit a three-week high against the yen <JPY=EBS> of 106.68 as U.S. 10-year Treasury yields rose to four-week peaks <US10YT=RR>. It was last at 106.53 yen, up 0.5%.
Analysts said the dollar will remain supported as a safe haven for now amid the deadlock over fiscal stimulus as well as mounting U.S.-China tensions.
China imposed sanctions on 11 U.S. citizens, including Republican lawmakers, following Washington's sanctions on Hong Kong and Chinese officials.
U.S. Treasury Secretary Steven Mnuchin said companies from China and other countries that do not comply with accounting standards will be delisted from U.S. stock exchanges as of the end of 2021.
Market response to the U.S.-China conflict has been limited, but analysts say there could be longer-term implications.
The Australian <AUD=D3> and New Zealand dollars <NZD=D3> reversed gains versus the greenback.Sterling also gave up gains against the dollar, falling 0.2% at $1.3041 <GBP=D3>. Earlier the pound rose after Bank of England Deputy Governor Dave Ramsden said the central bank will step up quantitative easing if the British economy struggles again.
(Reporting by Gertrude Chavez-Dreyfuss Editing by Cynthia Osterman and Alistair Bell)
