TOKYO, Nov 25 — The dollar nursed losses on Wednesday as progress in developing a novel coronavirus vaccine and expectations for a fiscal boost from a new US government triggered a shift of funds from the greenback to riskier assets.
The US currency teetered near a two-moth low against the Australian dollar and a two-year low against the New Zealand dollar, both considered barometres of risk sentiment due to their close ties with the global commodities trade.
Bitcoin, a cryptocurrency known for its volatile price swings, also traded near an all-time high, in a further sign that investors are growing more comfortable taking on riskier positions.
The US dollar’s declines are likely to continue because a vaccine and the expected choice of former Federal Reserve Chair Janet Yellen as US President-elect Joe Biden’s next Treasury secretary relieve two big uncertainties for investors.
“Rising yields may lend the dollar some support, but the overall direction is it will head lower,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.
“The trend has shifted to favour risk assets. Yellen will team up with the Fed and support the economy. US rates will remain low for a long time.”
The dollar stood at US$1.1901 (RM4.83) against the euro on Wednesday in Asia, close to a two-week low.
The British pound bought US$1.3363, close to the highest in more than two months.
Against the yen, the dollar held steady at 104.48. Research suggesting that a Covid-19 vaccine could be available before year end has sent US stocks surging to record highs and reduced the appeal of holding the dollar as a safe-harbour currency.
Risk appetite has also improved after the outgoing US President Donald Trump’s administration began cooperating with the Biden transition, and after reports that Yellen, an advocate of more fiscal spending, will take the top job at Treasury.
The dollar index, pitting the dollar against a basket of six major currencies was at 92.129 after falling 0.4 per cent yesterday.
The Antipodean currencies were already on the front foot as investors unwound bets for additional monetary easing in both countries.
Improving risk appetite means the Australian dollar’s next target is its high of US$0.7413 on September 1.
The New Zealand dollar, which has rallied 5.6 per cent so far this month, is trading just shy of its strongest since June 2018. Bitcoin, the most popular cryptocurrency, edged up to US$19,189, approaching its record of US$19,666 from December 2017.
Source: Malay Mail
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