Falling Dollar Steadies as Virus Worries Continue

The dollar nursed losses on Thursday after five sessions of declines.  Investors’ optimism about COVID-19 vaccines collided with worries about rising infections. Their enthusiasm ran into concerns about the risks to the fragile global economic recovery.

Small gains against most major currencies helped the dollar from Wednesday’s eight-session low. However, it remained near the month’s trough of 92.129.

Surging COVID-19 cases in the United States have brought opposing forces on the greenback, with a safety bid supporting it. New speculation of monetary easing to boost the economy has undermined it.

Concern has also pushed the Japanese yen about 0.8% higher this week. The safe-haven yen was regaining roughly three-quarters of the sharp loss it suffered last week. That was when Pfizer (NYSE:PFE) made an announcement on its COVID-19 vaccine.

The Japanese currency was steady at 103.80 per dollar, not far below its recent eight-month high of 103.18. Its Antipodean neighbors, the risk-sensitive Australian and New Zealand dollars, each eased about 0.2%.

In the eurozone, the euro (EUR=) faces pandemic problems of its own as lockdowns spread across the continent. Marginally it softened to $1.1846.

According to reports, Europe’s leaders would demand the European Commission to publish no-deal plans as the year-end deadline approaches.

In Asia’s forex, sterling slid 0.2% to $1.3237.

The South Korean won dropped 0.6% to 1,114.25 per dollar. Dealers said they suspected central bank intervention following the finance minister’s vow to act upon stabilizing the currency market.

Moreover, the Thai baht also softened for a second straight day. The central bank had intervened to slow its recent rise.

Fed to the Rescue

The dollar’s gains following the vaccine announcement have now almost evaporated. That’s because traders have quit safe haven currencies and selling pressure returned to the greenback through this week. 

Fiscal stimulus plans have gone by the wayside over President Donald Trump’s refusal to concede the election. This is consuming lawmakers’ attention. Speculation that the Federal Reserve may further loosen monetary at its December meeting is growing.

On Wednesday, two top Fed officials held out the option of doing more. Treasuries have rallied, anticipating a possible expansion of Fed bond buying.

UBS Global Wealth Management outlined a softer dollar as a pillar of their 2021 forecasts. This is mostly owing to the Fed holding rates very low for a long time.

All of that has helped lift the Chinese yuan, which has gained more than 9% against the dollar since May.  It was supported by a yawning yield gap.

U.S. jobs figures will be awaited on Thursday for guidance on the Fed’s next moves. Furthermore, European Central Bank President Christine Lagarde appears at a European Parliament Committee hearing at 1000 GMT in Frankfurt.