The dollar index has dropped nearly 13% from a three-year peak hit in March
The dollar started the new year by slipping broadly on Monday as investors sold it for just about everything else in the Asia session, wagering the world’s pandemic recovery will drive other currencies higher.
The euro, which had dipped on New Year’s Eve profit-taking, rose 0.3% to $1.2252. Sterling firmed to $1.3698, levels last seen in early 2018, and the Chinese yuan leapt 0.9% to a 30-month high of 6.4647 per dollar.
The safe-haven yen rose 0.3% to 102.94 per dollar, and looked to test resistance at 102.55, after Japan’s Prime Minister, Yoshihide Suga, said his government is mulling a state of emergency in Tokyo as infections rise.
The Australian and New Zealand dollars each gained about 0.3% to hold just below multi-year peaks.
I think the market is still in this look-through mood, said Bank of Singapore currency analyst Moh Siong Sim. People are looking through pockets of bad news, and the virus resurgence, because of a few things that are supportive, chiefly referring to the vaccine rollout but also mentioning U.S. stimulus and the Brexit trade deal.
Low U.S. interest rates, massive U.S. budget and trade deficits and a belief that rebounding world trade will drive non-dollar currencies higher have set the dollar on a downward course that has gathered pace as more investors piled in.
The dollar index posted its first annual loss since 2017 last year and has fallen roughly 13% from a three-year peak hit at the height of the pandemic panic in March.
It was last 0.08% weaker at 89.688 and not far above a more than 2-1/2 year low of 89.515 made last week.
The softening dollar boosted commodity prices and pushed bitcoin as well as several Asian currencies to milestone highs.
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