On Monday, a recovery in global market sentiment weighed on the dollar, while other riskier currencies strengthened. Significantly, the optimism about U.S. President Joe Biden’s stimulus plans took precedence over the impact of coronavirus.
Additionally, market sentiment had become more cautious at the end of the past week as European economic data revealed that lockdown restrictions to limit the spread of the virus hurt business activity, dragging stocks lower.
Demand for safe-haven dollar declined. The American currency dropped overnight by 0.2% and settled at 90.094.
According to analysts, the U.S. dollar will dip during 2021. According to weekly futures data from CFTC, the net speculative short position on the greenback boosted to its larget in ten years in the week to January 19.
Traders are bullish on the euro
Meanwhile, the euro stood at $1.2174 against the American currency. Significantly, at the European Central Bank meeting last week, President Christine Lagarde announced the bank was closely watching the euro. The euro increased by 9% last year against the greenback and hit new two and a half year highs earlier in January.
However, traders are still bullish on the euro, anticipating the bar for a rate cut to be high.
According to Ulrich Leuchtmann, head of FX and commodity research at Commerzbank, in the short term, the threshold for a rate cut is high, and in the long term, more than one or two cuts would be improbable.
Moreover, the Australian dollar, risk-sensitive currency, increased by 0.2% and settled at 0.773 against the U.S. dollar at 0822 GMT.
As it’s known, Australia approved the Pfizer-BioNTech coronavirus vaccine, however announced that the country would require distributing a locally manufactured vaccination earlier than planned.
Furthermore, the New Zealand dollar boosted by 0.4%, while the Norwegian crown climbed 0.3% against both the U.S. dollar and euro.
Additionally, the safe-haven Japanese yen stood at 103.735 against the American currency.
The Switzerland franc declined slightly against the euro and settled at 1.0786 at 0829 GMT.