Euro climbs on second vaccine optimism

London

THE euro rose against the dollar on Tuesday, helped by optimism over another coronavirus vaccine, while the Chinese yuan hit its highest against the US currency since June 2018.

Europe's shared currency, however, fell against a broadly stronger pound, which gained on media reports that Britain could reach a post-Brexit trade agreement with the European Union by early next week.

Drugmaker Moderna became the second US pharmaceutical company in a week to report positive results from trials of a Covid-19 vaccine, considered necessary to eradicate the pandemic.

Last week, encouraging progress in vaccine testing helped the dollar rise against the safe-harbour yen and the Swiss franc.

Some of those moves reversed direction on Tuesday, with the yen gaining back ground against the dollar.

"Euro/dollar remains well-supported, buoyed by global optimism," said Chris Turner, global head of markets at ING in a note to clients.

"Given the challenges Europe faces - in the middle of a second lockdown - the euro certainly won't lead the rally against the dollar, but we think the dollar decline is broad enough to drag euro/dollar back to US$1.1920." The euro last traded 0.2 per cent higher to the dollar at US$1.18770.

Sterling last traded half a percent higher at US$1.3266 and also edged up 0.3 per cent to 89.51 pence per euro. The greenback lost 0.3 per cent to trade at 104.20 yen.

Investors in the dollar were looking ahead to the release of US retail sales and industrial production later on Tuesday to gauge the health of the economic recovery.

However, policymakers' response to a record number of coronavirus cases, hospitalisations and deaths in several US states is likely to remain of greater concern.

The dollar index against a basket of major currencies stood at 92.431, its lowest in more than a week.

New infections are also increasing in Britain, Europe and Japan, further clouding the economic outlook.

The Australian dollar held on to overnight gains against the greenback, while the New Zealand dollar fell back after hitting its strongest in more than a year as investors scaled back bets for additional interest rate cuts.

Minutes from the Reserve Bank of Australia's most recent policy meeting showed the central bank was ready to provide yet more policy stimulus if needed after cutting rates to record lows. REUTERS