Vaccine progress, EU deal send USD lower

Vaccine hopes give a booster shot to US dollar rotation

The dollar index fell by 0.20% overnight to 95.82, as the US dollar renewed its retreat versus developed market currencies. Positive news on the Covid-19 vaccine front, and Eurozone pandemic recovery fund progress, awoke currency markets from their recent slumber.

The EUR/USD rose 0.30% to 1.1445 overnight and has risen to 1.1465 in Asia as reports emerge that a final Eurozone deal has been agreed. EUR/USD looks set to test 1.1500 in the European session. GBP/USD rose 0.80% to 1.2660 overnight, with Astra-Zeneca’s vaccine news. This morning GBP/USD is resting its 200-day move average (DMA) at 1.2695, with a daily close above, opening further gains to 1.2800 in the days ahead.

The trade-centric commonwealth commodity currencies also outperformed. The Australian, New Zealand and Canadian dollars all rose 0.30%. The AUD/USD has shrugged off dovish comments from the RBA Governor this morning, breaking 0.7000 on its way to 0.7020. The RBA minutes from the July meeting indicated that the RBA isn’t particularly concerned with the exchange rate, as the AUD has racked up strong gains in recent months. AUD/USD now looks set to test its June high at 0.7065.

Onshore Chinese yuan has also strengthened overnight, with USD/CNY at 6.9900 today. USD/CNY support is nearby at 6.9800 and is likely to break by tomorrow, with a more robust CNY fix by the PBOC almost certain given currency moves today. That would leave USD/CNY poised to drop to the 6.9500 regions.

Regional Asia has been the laggard of late, as economic worries have sapped the strength from the Singapore dollar, Thai baht, Indonesian rupiah and Malaysian ringgit. The US dollar weakness seen elsewhere has yet to be seen in regional Asia. That state of affairs is unlikely to continue if all things stay as they are. That should set up a period of outperformance by regional Asian currencies if the bullish sentiment elsewhere maintains its momentum.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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