Dollar gains in tug-of-war between vaccine, rising virus cases

Overall, the greenback ended the week on a loss against a currency basket. — Reuters pic
Overall, the greenback ended the week on a loss against a currency basket. — Reuters pic

NEW YORK, Nov 21 — The dollar yesterday rose against major currencies such as the euro and yen, with traders consolidating positions amid competing forces that pull the currency in different directions: the surge in virus cases, on the one hand, and positive vaccine news, on the other.

The possible resumption of US stimulus talks for Covid-19 relief has also weighed on the dollar as a safe haven.

Republican and Democratic senators agreed on Thursday to revive those discussions

Overall, the greenback ended the week on a loss against a currency basket.

The week started off on a negative note for the dollar with positive news on a vaccine for Covid-19, but the market has since moved back and forth between focusing on coronavirus cases and the virus drug.

Pfizer Inc said it had applied for emergency use authorisation in the United States for its Covid-19 vaccine.

“We think we are in the early stages of a recovery in the global economy and trade from the shock of the pandemic and this will further” weigh on the dollar and support the euro,” Jonathan Petersen, markets economist, at Capital Economics, said.

US Treasury Secretary Steven Mnuchin, meanwhile, defended yesterday his decision to end several of the Federal Reserve’s key pandemic lending programmes on December 31, saying Congress should use the money to help small US companies with grants instead.

The dollar briefly rose overnight after the Mnuchin news late Thursday.

“The request comes as most lending facilities haven’t been tapped for more than the amount committed by the Treasury to backstop the programmes, suggesting market functionality is sufficient to warrant their expiration,” said Monex Europe in a research note.

In afternoon trading, the dollar was flat against a currency basket at 92.369 in a quiet day for currency markets.

The euro was down 0.1 per cent against the dollar at US$1.1859 (RM4.85), posting a small weekly gain.

Action Economics noted some pre-weekend selling in the euro going into the London close.

“The lack of progress between the European Union and the UK on Brexit trade talks has likely kept a cap on the euro despite generally waning US dollar sentiment,” it said in its daily blog.

The Australian dollar — seen as a liquid proxy for risk appetite — posted its best monthly gain versus the US dollar since April. It last traded up 0.4 per cent at US$0.7308.

The New Zealand dollar hit new two-year highs of US$0.6951, helped by positive risk appetite.

It was last up 0.3 per cent at US$0.6938.

The US dollar was up 0.1 per cent versus the yen at ¥103.81.

Elsewhere, Bitcoin rose to a three-year high of US$18,824 yesterday, getting close to its all-time high of just under US$20,000. It was last up 4.6 per cent at US$18,646.15. — Reuters

Related Articles