US dollar near five-day low; commodity currencies gain

London

THE US dollar was steady on Tuesday, near the previous session's five-day low, as markets appeared less concerned by the spread of the Delta coronavirus variant while risk-related currencies benefited from rising commodity prices.

Risk appetite in global markets strengthened after the US Food and Drug Administration granted full approval to the Covid-19 vaccine developed by Pfizer and BioNTech in a move that could accelerate inoculations in the United States. A bounce in China's technology sector also contributed to risk-on sentiment.

Rising Covid-19 infections caused by the highly contagious Delta variant have fuelled concerns about the recovery from the global health crisis. But, markets have largely overlooked that this week, with analysts citing thin liquidity as a factor driving apparent swings in risk appetite.

At 1131 GMT, the dollar index was flat at 92.998. It hit a five-day low of 92.947 on Aug 23, registering its largest one-day drop since May.

The euro was down about 0.1 per cent against the dollar at US$1.17385.

Market attention is focused on the Jackson Hole conference on Friday, at which some investors expect US Federal Reserve chair Jerome Powell to give hints on a possible timeline for the tapering of monetary stimulus.

Covid-19 case counts are also being watched closely, particularly in China and New Zealand. Outbreaks in China appear to be coming under control while New Zealand, where monetary policy was put on hold last week, is in lockdown to contain the Delta variant.

The Australian dollar, viewed as a liquid proxy for risk appetite, was up 0.4 per cent at US$0.72425.

The New Zealand dollar was up 0.8 per cent at a one-week high of US$0.6946, boosted by comments from the Reserve Bank of New Zealand (RBNZ)'s assistant governor, who said that policymakers had actively considered raising interest rates last week.

The RBNZ left rates on hold at a record-low 0.25 per cent, but flagged a tightening before the end of the year.

A senior central bank official said on Aug 23 that the latest coronavirus outbreak in New Zealand is not a "game changer" yet and there is no pressure to act on monetary policy.

Firmer commodity prices also helped the Australian and New Zealand dollars earlier in the session.

The Norwegian dollar was up 0.6 per cent against the euro, with the pair changing hands at 10.4053, while the Canadian dollar was up 0.2 per cent against the US dollar. REUTERS