US dollar steadies amid rising Covid-19 cases

London

THE US dollar steadied on Thursday as investors tempered bullish expectations about a Covid-19 vaccine that is unlikely to avert a grim winter in Europe and the United States as the pandemic's second wave intensifies.

The US dollar index hovered between 0.1 per cent higher and flat during early deals in Europe, while the risk-sensitive Australian and New Zealand dollars ground about 0.2 per cent lower. The euro gained 0.1 per cent.

Europe is already grappling with surging infections and new social restrictions, with Germany's economic advisers trimming next year's growth outlook. New York has ordered bars and restaurants to close early as US cases hit record levels.

"The weakness in broad US dollar and reflationary momentum in equities, which we saw on the back of the US election and improvements in the vaccine situation, seem to be fading across FX and equities," said Christin Tuxen, head of FX Research at Danske Bank.

Sterling licked its wounds as trade talks between Britain and the European Union seemed set to drag on past yet another deadline, raising the prospect that no trade deal may be reached before Brexit transition arrangements end on Dec 31.

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The British currency last traded 0.3 per cent lower to the US dollar at US$1.3182.

The moves have, for now, put the brakes on a long, precipitous drop for the greenback, which had shed about 10 per cent against a basket of currencies between March and the announcement of progress on Pfizer's Covid-19 vaccine on Monday.

"The US dollar is steady even as US Covid-19 cases rose 135,000 yesterday while EUR-USD dips back below 1.18 as Covid-19 case counts snowball across Europe as the winter of despair sets in, suggesting further monetary and fiscal measure will be on the way," said Stephen Innes, global chief market strategist at Axi.

Before a cautious mood spilled over from equities trade into the currency markets, the kiwi made a fresh 20-month high on the greenback as traders became less convinced that negative rates are a sure thing anymore for New Zealand.

Bond markets moved sharply across the curve to price longer odds on that possibility on Wednesday, and yields inched higher on Thursday as the kiwi rose to US$0.6915. It had last fallen back to trade 0.25 per cent lower on the day at US$0.6862. REUTERS