By Peter Nurse
Investing.com – The dollar weakened in early European trading Tuesday, trading near a six-week low, with the euro, in particular, benefitting from progress for the region’s vaccination programme.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was 0.1% lower at 90.925, having earlier fallen as low as 90.858, the weakest since March 3.
USD/JPY was up 0.1% at 108.30, GBP/USD was up 0.1% at 1.3990, after posting a fresh one-month high at $1.4009, helped by better than expected unemployment data. The risk-sensitive AUD/USD rose 0.6% to 0.7800, hitting a new one-month high as the Reserve Bank of Australia released the minutes from its latest policy meeting earlier in the day.
EUR/USD rose 0.2% to 1.2052, after climbing as high as $1.2072 for the first time since March 3.
The euro suffered against the greenback in the early months of this year as the European Union was slow in the rollout of Covid-19 vaccines, suffering a third wave of cases as a result. However, the region is catching up, helped by the announcement that the EU has secured an additional 100 million doses of the BioNTech/Pfizer vaccine.
“The good news is that lockdowns imposed last month do seem to have stabilized/reversed the rise in case numbers in many continental European countries. And vaccination rates do seem to be improving,” said analysts at ING, in a note.
The dollar had already been losing traction as U.S. bond yields have slumped from the 14-month peak touched last month, with the benchmark 10-year Treasury yield trading around 1.60%, reducing the greenback’s yield attraction.
This followed repeated assurances from Fed policymakers that near-term price pressures will be transitory, and can be ‘looked through’.
Attention will soon turn to Thursday’s meeting of the European Central Bank, although few fireworks are expected.
“We do not expect to see any major market reactions to this week’s ECB meeting, but if we have to take a stance, we see risks tilted towards a slightly hawkish market reaction,” said analysts at Nordea, in a note, “as [ECB President Christine] Lagarde may struggle to defend the changed pace of purchases as being that significant in light of the recent numbers.”
Elsewhere, USD/CNY fell 0.2% to 6.4960, after the People’s Bank of China kept its loan prime rate steady at 3.85% earlier in the day, as widely expected.
China’s economy is on track to return to trend growth after its V-shaped recovery from the coronavirus slump ended with a record pace of expansion last quarter, according to analysts at Goldman Sachs (NYSE:GS).
Dollar Weakens to Six-Week Low; Euro on The Rise
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