The dollar was on the defensive on Thursday in forex exchange. Downbeat U.S. economic data and optimism about COVID-19 vaccines prompted investors to seek out riskier assets. These assets are tied to global commodities and emerging markets.
The British pound traded near a more than two-month high against the greenback. Investors will be bracing for updates on negotiations between Britain and the European Union this week.
Market watchers said the dollar’s decline has been so swift that it could rebound in the short term. Though some investors still expect a fall over the long term as they shift positions. They anticipate the coronavirus outbreak to wane next year.
A recovery led by China in the global economy and commodities should benefit commodities currencies. This was according to Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
He said that the outlook is good, but they are reaching levels where authorities might feel some concern. Other emerging market currencies with good fundamentals should benefit, Yamamoto added.
Currencies Movements
The dollar stood at $1.1926 against the euro, close to its weakest in over two months.
Sterling bought $1.3392, near its strongest since Sept. 2, while the pound held steady at 89.02 pence per euro.
With only a little changed, the dollar was at 104.32 yen.
In recent weeks, investors have rushed to riskier currencies and emerging-market assets. The rush came after news on positive data on COVID-19 vaccine efficacy. Also, it came after signs of stability in U.S. politics, which has weighed broadly on the dollar.
Sentiment for the greenback suffered heavy losses. Data on Wednesday showed weekly U.S. jobless claims increased more than anticipated and personal incomes fell.
More job losses are likely, some economists said. Many U.S. states reinforce restrictions on businesses to curb the spread of the virus.
In more than two months, the dollar index was near the lowest.
Furthermore, in Asia, dollar trading was subdued. This is due to the U.S. financial markets being closed later on Thursday for the Thanksgiving holiday.
Forex news reports that the onshore yuan is resuming its advance toward a 29-month high set last week. The currency rose to 6.5688 per dollar.
With the Antipodean currencies, the Australian dollar traded near its highest since September. It was supported by improving risk appetite and strong Chinese demand for the commodities that Australia exports.
The New Zealand dollar traded close to its strongest level in over two years.
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