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FOREX-Dollar steadies as vaccine enthusiasm fades, COVID-19 cases rise

Published 12/11/2020, 09:54
Updated 12/11/2020, 10:00

* Dollar index up nearly 1% this week
* Aussie, kiwi sink as vaccine enthusiasm fades
* World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Ritvik Carvalho
LONDON, Nov 12 (Reuters) - The dollar steadied on Thursday
as investors tempered bullish expectations about a COVID-19
vaccine that is unlikely to avert a grim winter in Europe and
the United States as the pandemic's second wave intensifies.
The dollar index USD= hovered between 0.1% higher and flat
during early deals in Europe, while the risk-sensitive
Australian and New Zealand dollars ground about 0.2% lower. The
euro EUR= gained 0.1%.
Europe is already grappling with surging infections and new
social restrictions, with Germany's economic advisers trimming
next year's growth outlook. New York has ordered bars and
restaurants to close early as U.S. cases hit record levels.
"The weakness in broad USD and reflationary momentum in
equities, which we saw on the back of the U.S. election and
improvements in the vaccine situation, seem to be fading across
FX and equities," said Christin Tuxen, Head of FX Research at
Danske Bank.
Sterling GBP= licked its wounds as trade talks between
Britain and the European Union seemed set to drag on past yet
another deadline, raising the prospect that no trade deal may be
reached before Brexit transition arrangements end on Dec. 31.
The British currency last traded 0.3% lower to the dollar at
$1.3182 GBP=D3 . GBP/
The moves have, for now, put the brakes on a long,
precipitous drop for the dollar, which had shed about 10%
against a basket of currencies between March and the
announcement of progress on Pfizer's COVID-19 vaccine on Monday.
Larger moves were held in check as investors await speeches
from Federal Reserve Chair Jerome Powell, European Central Bank
President Christine Lagarde and Bank of England Governor Andrew
Bailey at a central banking forum later on Thursday.
"The USD is steady even as U.S. COVID-19 cases rose 135k
yesterday while EUR-USD dips back below 1.18 as COVID-19 case
counts snowball across Europe as the winter of despair sets in,
suggesting further monetary and fiscal measure will be on the
way," said Stephen Innes, global chief market strategist at AXI.

KIWI HOVERS
Before a cautious mood spilled over from equities trade into
the currency markets, the kiwi made a fresh 20-month high on the
greenback as traders became less convinced that negative rates
are a sure thing anymore for New Zealand. NZD/
Bond markets moved sharply across the curve to price longer
odds on that possibility on Wednesday, and yields inched higher
on Thursday as the kiwi rose to $0.6915. It had last fallen back
to trade 0.25% lower on the day at $0.6862.
"Less stimulus is required than we thought in August, but
still a substantial amount of stimulus," RBNZ Assistant Governor
Christian Hawkesby told Bloomberg in an interview.
ANZ Bank still thinks New Zealand rates will head below zero
in August 2021, but said it's now "become a bit of a toss up"
and that it is clear that going negative is no longer urgent.
Late in the afternoon, however, some of that move reversed
and the New Zealand dollar NZD=D3 last sat at $0.6871, while
the Aussie AUD=D3 retreated to $0.7264.
Along with the virus, U.S. President Donald Trump's refusal
to concede defeat to Democrat Joe Biden in last week's election
is also beginning to jangle investors' nerves.
CBA analysts in Sydney say a 5% leap in the greenback is
possible if Trump does find a way to stay in office, most likely
by relying on electoral college delegates to cast votes for him,
even if their states endorsed Joe Biden at the ballot box.

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Dollar vs. COVID cases https://tmsnrt.rs/38zp8Zj
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