Vaccine rollout hopes keep US dollar down

London

PROGRESS towards a COVID-19 vaccine rollout lifted riskier currencies on Monday, keeping the US dollar on its downward trend.

AstraZeneca said on Monday that its vaccine could be around 90 per cent effective. The British drugmaker will prepare submission of data to authorities around the world that has a framework for conditional or early approval.

This was the latest in a string of positive vaccine developments after US-based Moderna Inc said on Nov 16 its experimental vaccine was 94.5 per cent effective and, a week earlier, Pfizer Inc and Germany's BioNTech SE said their vaccine candidate had demonstrated greater than 90 per cent efficacy that rose to 95 per cent with analysis of full trial data.

In a quiet overnight session, in which price-action was limited by a holiday in Japan, currency market sentiment was also lifted by a top US health official saying on Sunday that vaccinations could start taking place by mid-December.

"Markets are following pandemic news at the moment - vaccine optimism seems to be supporting risk assets for the time being," said Paul Donovan, chief economist at UBS Global Wealth Management in a note to clients.

The US dollar, which dropped 0.4 per cent last week, continued its downward trend as traders' risk appetite grew. It was down 0.1 per cent versus a basket of currencies at 92.234 at 0813 GMT.

The US dollar also lost out to the yen, with the pair changing hands at 103.76 at 0820 GMT.

The New Zealand dollar surged to a two-year high after strong retail sales data, reducing the risk of further policy easing. It was up 0.4 per cent on the day at 0.6952 by 0822 GMT.

The Australian dollar - a liquid proxy for risk - was up 0.4 per cent at 0.73285.

The euro edged up, at US$1.1868. European Union leaders will continue to discuss the bloc's 1.8 trillion euro (S$2.87 trillion) Covid-19 recovery plan, which has been vetoed by Poland and Hungary, German Chancellor Angela Merkel said last week.

Eurozone flash PMI data is due at 0900 GMT, followed by UK flash PMIs at 0930 GMT and US at 1445 GMT.

ING strategists wrote in a note to clients that the data would have to be a significant surprise to have an adverse affect on the euro.

"Assuming the PMIs are not sharply weaker than consensus, we could see EUR/USD drifting up the 1.1915/20 area," they wrote. REUTERS