US dollar steady ahead of US holiday

US dollar down slightly in Asia

Overnight the US dollar consolidated on forex markets, with the dollar index almost unchanged at 92.75. Amongst the major currencies, the Japanese yen retraced some of its losses, USD/JPY easing to 105.35 overnight, and dropping further to 105.10 this morning. The sterling continues to outperform, rising 0.80% to 1.3280, after a partial defeat of the Government’s Markets Bill and expectations that a European trade agreement will occur. The large number of Pfizer vaccines booked by Boris pre-year-end may also be lifting spirits and giving a boost to the pound.

US dollar likely to trade quietly in holiday-thinned market

Although the US holiday today will mute volumes, the dollar is retreating modestly in Asia, with the dollar index falling to 92.65. Commodity currencies are notable outperformers. The AUD/USD has risen 0.35% to 0.7310, while the NZD/USD has jumped 1.0% to 0.6890 after the Reserve Bank of New Zealand left interest rates unchanged this morning at 0.25 per cent. At a time where stock markets are more cautious, currency markets appear content to continue the move into pro-cyclical currencies, after the US election hiccup, spurred on by vaccine recovery hopes.

Asian currencies are also moving higher today, led by the Chinese yuan. USD/CNY has fallen 0.25% to 6.5950 and will be eyeing the week lows at 6.5650. The Korean won, Singapore dollar and Thai baht are also notable outperformers, suggesting that the markets believe that Asia is well placed to outperform, whether vaccines arrive to shorten the Covid-19 recession or not. I can’t disagree.

Overall, I expect the US dollar to continue to gently give ground over this week and next, with any other pharma-companies announcing phase-3 success for a vaccine accelerating that trend. The path may not be linear though, as the US presidential election drama and Trump-tweet risk could cause rapid, if short-term, reversals.

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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