Dollar Stuck Near Support, NZ$ Storms to 2-year High

The U.S. dollar eased on Monday in forex exchange. The prospect of an early rollout of COVID-19 vaccines offset worries about economic restrictions to control the pandemic. This favors risk assets for the moment.

In Japan, a holiday kept most major currencies contained. The New Zealand dollar, though, stormed to a two-year high of $0.6962.  Very strong retail sales data rejected the risk of further policy easing and left yields attractively high. 

The euro climbed to $1.1872, after repeatedly failing to break above $1.1893 resistance last week. The currency needs to clear the November high of $1.1919 to extend its uptrend.

Capital Economics analysts are bullish on the single currency’s longer-term outlook.

They lifted their forecasts for the euro. It’s now seen to be at $1.2500 by the end of 2021 and $1.3000 at the close of 2022. That was up from $1.2000 and $1.2500 previously.

The dollar has also been drifting slowly and last stood at 103.74, just above chart support at 103.62. A break there would see a re-test of the November trough of 103.16, the lowest since March.

The dollar was lower at 92.266 and again uncomfortably close to support at 92.129 and 91.373.

Positive news on vaccines have been weighing on the greenback. The first people in the United States could receive a COVID-19 vaccine a day. That will be after the U.S. Food and Drug Administration grants approval in mid-December.

Moreover,  Britain could give regulatory approval to Pfizer-BioNTech’s COVID-19 vaccine this week.

On the other hand, millions of Americans are expected not to heed warnings to stay home for the Thanksgiving holiday. On the other, Germany might have to extend its lockdown until mid-December.

Monetary Policy Easing

COVID-19 restrictions across the U.S. has incited speculation the Federal Reserve might have to ease monetary policy further. In particular, there’s no fiscal stimulus deal in sight.

Last week, the U.S. Treasury Department’s surprise move to end some emergency lending programs only added to the speculation.

That will increase focus on the minutes of the Fed’s last policy meeting, which are due to be released on Wednesday. The minutes are expected to confirm what Fed policymakers discussed, adding to the bank’s asset-buying plans.

Analysts at TD Securities wrote that the minutes should help. That’s in gauging if their call for a lengthening of the maturity mix as soon as the December meeting remains on track.