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SINGAPORE (Reuters) – The dollar was firm on Tuesday, but was trading well below highs, in a mad surge overnight, as a new strain of coronavirus in Britain caused nervousness on the currency markets cleared up by the holidays.
The British pound fell 2.5% to $ 1.3190 as countries in Europe and Asia closed travel links with Britain to try to contain the highly contagious mutation.
Low liquidity also overstated the dollar’s gains in other currencies as short sellers bailed out. But moves largely unfolded as investors seized their chance to acquire the dollar’s bearish trend.
The pound, aided by a Bloomberg report which indicated that the European Union was considering a compromise on fishing rights – a stumbling block to a trade deal – recovered to trade at $ 1.3418 in Asia, although it remained on track as the negotiations progressed.
The euro rallied to $ 1.2229 on Tuesday after falling one cent to $ 1.2130. The yen was flat at 103.30 per dollar and the Australian and New Zealand dollars a little soft with the nervous mood, but well above the overnight lows.
“The euro has found an abundance of buyers on the deep decline,” said Stephen Innes, Bangkok-based chief strategist at currency broker Axi.
“The release of the ‘short dollar’ is probably nothing more damaging than a stretched positioning being knocked off the stake by Brexit scares. However, this shows the potential dangers of a universal bearish dollar sentiment, ”he said.
Betting on a weaker dollar as the global recovery from COVID-19 drives up global trade and commodity prices, tending to benefit export-oriented economies and their currencies, becomes increasingly congested trade as dynamic funds accumulate.
The value of overall bets against the dollar declined slightly last week, according to positioning data, but remains close to the nine-year highs reached in September.
Against a basket of currencies, the dollar is heading for a third consecutive quarterly loss and is down 12.5% from a three-year high in March.
The dollar index was last at 90.145 after hitting 91.022 overnight. Nerves over the new strain of coronavirus are keeping it above last week’s 2-1 / 2 year low at 89.723.
With a new outbreak in Sydney, which held the Australian dollar at $ 0.7566, 0.3% lower for the session, despite roaring retail sales figures.
Experts said there was no evidence the vaccines would not protect against the new variant of the virus, but Britain’s chief scientific adviser said meanwhile tighter restrictions on public life in Britain were likely.
Investors are eagerly awaiting confidence data in the United States and Germany later Tuesday and have been encouraged by hopes that stimulus checks could be sent to Americans next week.
British Prime Minister Boris Johnson has warned that there are still ‘problems’ to secure a trade deal with Europe, but financial markets are hopeful something can be found before the UK exemption expires customs duties on December 31.
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Singapore currency bid at 9:04 am (104100 GMT)
Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid
Previous change
Session
Euro / Dollar $ 1.2232 $ 1.2248 -0.12% + 9.11% +1.2250 +1.2228
Dollar / Yen 103.3300 103.3550 -0.03% -4.88% +103.3550 + 103.3200
Euro / Yen 126.39 126.45 -0.05% + 3.64% +126.5500 +126.3600
Dollar / Switzerland 0.8857 0.8859 -0.01% -8.45% +0.8862 +0.8855
Pound sterling / dollar 1.3421 1.3471 -0.35% + 1.21% +1.3467 +1.3418
Dollar / Canadian 1.2858 1.2858 + 0.01% -1.02% +1.2864 +1.2845
Aussie / Dollar 0.7568 0.7587 -0.24% + 7.87% + 0.7590 + 0.7567
NZ 0.7083 0.7096 -0.16% + 5.29% + 0.7105 + 0.7084
Dollar / Dollar
All spots
Tokyo spots
European spots
Volatilities
BOJ Tokyo Forex Market Information
Reporting by Tom Westbrook; Editing by Sam Holmes
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