Dollar Up, But Gains Capped by B.1.1.7 Strain Jitters By Investing.comDecember 22, 2020
By Gina Lee
Investing.com – The dollar was up on Tuesday morning in Asia, but jitters over a new COVID-19 strain saw the greenback trade well below the peaks seen during a rollercoaster session overnight.
The that tracks the greenback against a basket of other currencies edged up 0.20% to 90.132 by 11:13 PM ET (4:13 AM GMT). However, the dollar is headed for a third consecutive quarterly loss and is down 12.5% from a three-year peak in March.
The recent hopes for a global economic recovery from COVID-19 that would boost trade and commodity price, and the resultant bets on a falling dollar, saw export-driven economies and their currencies become an increasingly crowded trade as momentum funds pile in.
Positioning data showed that the value of overall bets against the dollar eased a little during the previous week but remained near nine-year highs struck in September. Dollar gains in other currencies were also exaggerated due to low liquidity as short sellers bailed out. However, these moves largely unwound as investors seized the opportunity to buy in to the dollar’s downtrend.
The discovery of a new strain of the COVID-19 virus, also referred to as the B.1.1.7 strain, in the U.K. saw the pound fall as much as 2.5%, with countries including Canada and Hong Kong shutting their borders to the U.K. to keep the strain out.
A full Tier 4 lockdown has been imposed on London and southeastern England, with the ensuing travel chaos and the possibility of food shortages coming days before Christmas.
Although there is no evidence that recently rolled out vaccines would not protect against the B.1.1.7 strain, the U.K.’s chief scientific advisor Sir Patrick Vallance warned that the increased transmissibility of the strain was now confirmed and this “likely means that measures will be increased in some areas and not reduced” during a press conference on Monday.
The pair edged up 0.11% to 103.41.
The pair was down 0.28% to 0.7563 and the pair fell 0.56% to 0.7063. Sydney continues to deal with its own new outbreak of COVID-19 cases.
The pair inched up 0.05% to 6.5503.
The pair was down 0.46% to 1.3401. With just days left until the U.K. leaves the European Union (EU), Prime Minister Boris Johnson warned that there are still “problems” in securing a post-Brexit trade deal. However, some investors still remained hopeful that a deal could be struck before the U.K.’s exemption from tariffs expires on Dec. 31.
The hopes were based on a report that the EU was considering a compromise on fishing rights, which have been a stumbling block to a deal. The pound continues to remain on edge as negotiations continue.
The euro recovered to $1.2229 on Tuesday, after fallingl to $1.2130.
“The euro found an abundance of buyers on the deep dip. The ‘short dollar’ clear-out is probably nothing more nefarious than stretched positioning getting taken out to the woodshed on Brexit scares. However, it shows the potential dangers of universally bearish dollar sentiment,” Axi chief strategist Stephen Innes told Reuters.
Meanwhile, the U.S. House of Representatives passed an $892 billion coronavirus aid package on Monday, alongside a $1.4 trillion measure to keep the government funded for another year. The relief bill is currently under review by the Senate and will become law once signed by President Donald Trump.
Data, including the U.S. and Germany’s , are due later in the day.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.