SYDNEY, Nov 23 — The US dollar marked time today as the prospect of an early rollout of coronavirus vaccines was offset by concerns about economic restrictions to control the spread of the virus, leaving safe-haven assets in limbo.
A holiday in Japan also made for sparse liquidity and made investors reluctant to test major chart barriers on a number of dollar pairs.
The euro was hovering at US$1.1858, having repeatedly failed to break above the US$1.1993 resistance level last week. It needs to clear the November top of US$1.1919 to extend its uptrend.
Analysts at Capital Economics are bullish on the single currency’s longer-term outlook.
“We think that the exchange rate will rise further over the next few years against a backdrop of lower euro-zone stability risks; an increased real yield gap between the euro-zone and the US; and a continued recovery in the global economy,” they wrote in a note.
They lifted their forecasts for the euro and now see it at US$1.2500 by the end of 2021 and US$1.3000 at the close of 2022, up from US$1.2000 and US$1.2500 previously.
The dollar has also been drifting slowly lower on the Japanese yen and last stood at 103.80, just above chart support at 103.62. A break there would see a re-test of the November trough of 103.16, which was the lowest since the market turmoil of March.
Against a basket of currencies, the dollar was a shade softer at 92.374 and again uncomfortably close to support at 92.129 and 91.373.
Promising news on vaccines were weighing on the safe-haven dollar. The first people in the United States could receive a Covid-19 vaccine a day after the US Food and Drug Administration grants approval in mid-December.
And Britain could give regulatory approval to Pfizer-BioNTech’s Covid-19 vaccine this week.
On the other hand, millions of Americans are expected to ignore warnings to stay home for the Thanksgiving holiday, while Germany might have to extend its lockdown until mid-December.
The rash of coronavirus restrictions across the United States has stoked speculation the Federal Reserve might have to ease monetary policy further, particularly with no fiscal stimulus deal in sight.
Last week’s surprise move by the US Treasury Department to end some emergency lending programs only added to the speculation.
That will heighten the focus on the minutes of the US central bank’s last policy meeting, which are due to be released on Wednesday. The minutes are expected to confirm Fed policymakers discussed adding to the bank’s asset-buying plans.
“The minutes should help gauge whether our call for a lengthening of the maturity mix as soon as the December meeting remains on track,” analysts at TD Securities wrote in a note. — Reuters
