Vaccine hopes boost euro; dollar dips amid subdued U.S. yields

Article content

TOKYO — The dollar sank to a fresh

6-1/2-week low against major peers on Tuesday as the euro led a

rally on the back of a brightening outlook for the region’s

vaccination program.

The dollar had already been losing traction as U.S. bond

yields retreated from a 14-month peak touched last month,

reducing the greenback’s yield allure.

The euro rose as high as $1.20715 for the first

time since March 3, while the British pound touched a fresh

one-month high at $1.40090, building on a 1% jump

overnight.

Some analysts say support for the euro likely came from the

announcement that the European Union has secured an additional

100 million doses of COVID-19 vaccine by BioNTech and

Pfizer.

“Europe is really the main region which is going to see

accelerating vaccinations this quarter. And later in the year,

we will see accelerating vaccinations, broadly, in emerging

market economies,” said Zach Pandl, co-head of foreign exchange

strategy for Goldman Sachs in New York.

“The U.S. got ahead of the curve in the first quarter, but

other countries are going to be quickly catching up.”

The dollar index dropped as low as 90.877, the

weakest since March 3, having lost some 2.7% from its five-month

peak at 93.439 hit last month.

Article content

The U.S. currency fell to as low as 107.975 yen,

its weakest in more than six weeks.

The moves are the reverse of what was happening in the first

three months of the year, when the dollar gained against the

very same major currencies as yields rose on U.S. Treasuries and

offered higher returns on the greenback.

At that time, bond investors bet that massive fiscal

stimulus in the United States would spur faster inflation,

leading to an earlier exit from the Federal Reserve’s monetary

easing program.

But repeated assurances from Fed policymakers this month

that near-term price pressures will be transitory seem to have

soothed markets.

“I think that people are quite comfortable … that the

dollar is likely to be weaker structurally for longer,” said

Andrew Gillan, a portfolio manager at Janus Henderson Investors.

“And I don’t think we’ve seen enough evidence yet of that

changing, even with a little bit of recent strength.”

The 10-year U.S. Treasuries yield hit a one-month low of

1.529% last week. Though it ticked up to 1.615% on Tuesday, it

stood well below its March peak of 1.776%.

“One of the probably most important developments in macro

markets over the last month has been a stability in U.S. rates,”

said Goldman’s Pandl.

“That also opens up room for dollar weakness against a broad

set of currencies.”

The Australian dollar rose as high as $0.7800 for

the first time in a month after Reserve Bank of Australia

policymakers said in minutes of their meeting this month that

Article content

the country’s economic recovery has surpassed all expectations,

with an “above-trend” expansion likely this year and next.

The offshore Chinese yuan firmed to as strong as 6.4885 per

dollar, also a one-month high.

In cryptocurrencies, bitcoin slipped to around $55,000

, on track for a fifth straight day of losses.

It sank as low as $51,541.16 on Sunday, after hitting a

record high of $64,895.22 just days earlier.

Despite the retreat, the digital token has still almost

doubled in value so far this year, after more than quadrupling

in 2020.

“The recent drop in price for BTC definitely damaged the

technical picture: The old resistance level around $60,000

should have held up and catch the decline, but it did not,”

Julius de Kempenaer, senior technical analyst at

Stockcharts.com, said by email.

However, the “long-term trend for BTC — and crypto in

general — seems unharmed.”

========================================================

Currency bid prices at 501 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.2064 $1.2036 +0.22% -1.27% +1.2072 +1.2038

Dollar/Yen 108.1450 108.1400 -0.03% +4.67% +108.3020 +107.9750

Euro/Yen

Dollar/Swiss 0.9140 0.9153 -0.17% +3.28% +0.9156 +0.9138

Sterling/Dollar 1.4004 1.3989 +0.10% +2.50% +1.4007 +1.3977

Dollar/Canadian 1.2488 1.2531 -0.32% -1.91% +1.2529 +1.2490

Aussie/Dollar 0.7798 0.7755 +0.55% +1.36% +0.7799 +0.7755

NZ 0.7214 0.7180 +0.44% +0.42% +0.7218 +0.7180

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Hideyuki Sano

Editing by Shri Navaratnam)