- Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
The dollar was firm on Tuesday but was well below peaks hit on Monday's wild ride higher, as a new coronavirus strain in Britain sent jitters through holiday-thinned currency markets.
Sterling GBP= and the New Zealand dollar NZD= fell half a percent in cautious trade in Asia, the Australian dollar AUD= fell 0.4% and the euro EUR= was 0.2% softer at $1.2228.
At $1.3308, the pound was still nearly two cents clear of a 10-day low made on Monday, when it briefly lost as much as 2.5% after the virus mutation prompted countries to cut travel links with Britain and as Brexit trade talks stalled.
Low liquidity, with many traders logged out for the year, exaggerated the speed and size of the dollar's gains against other currencies, too, as stop-loss mechanisms dumped investors out of bets against the greenback.
The moves unwound over the New York session, as a Bloomberg report hinted at progress in Brexit trade negotiations and as Congress settled on a U.S. stimulus package, encouraging investors to buy back in to the dollar's downtrend.
"The euro found an abundance of buyers on the deep dip," said Stephen Innes, Bangkok-based chief strategist at currency broker Axi.
"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," he said.
The euro is a cent above its Monday low of $1.2130 and firmed 0.3% on the pound EURGBP= to 91.23 pence.
Experts said there was no evidence that vaccines would not protect against the new virus variant, but Britain's chief scientific adviser said that in the meantime tighter restrictions on public life in Britain were likely.
Britain also faces food shortages because countries across the globe have locked their borders to the country to try and contain the highly-infectious strain.
BREATHE The whippy price moves, even in light trade, highlight the risks in a market that is heavily short dollars and pricing a pandemic recovery that lifts commodity prices and benefits exporters and their currencies at the expense of the greenback.
The value of overall bets against the dollar eased a fraction last week, positioning data showed, but remains near nine-year highs struck in September.
0#NETUSDFX= A downtrend that has the dollar index on course for a third consecutive quarterly loss and has carried it some 12.5% lower from a March peak has left it both irresistible to momentum funds and overdue for a pause.
The index =USD , which measures the dollar against a basket of six major currencies was last up 0.2% at 90.259 though beneath its Monday top of 90.978. That is 0.6% above a 2-1/2 year trough of 89.723 it hit last week.
"Medium-term trends still favour (being) short dollars, short U.S. Treasuries and long commodities. The recent dollar index break below 90 supports our view that dollar weakness can persist next year," said Bank of America analyst Paul Ciana.
But, he added, big recent gains in currencies such as the Aussie dollar, the Swiss franc and Chinese yuan mean a pullback might be due.
"These are warning signs the dollar selloff may take a breather or bounce in the next two to four weeks."
The yuan, which has gained nearly 10% on the dollar since a March low has been steady for about a week now and was a fraction softer at 6.5433 per dollar on Tuesday.
======================================================== Currency bid prices at 12:59PM in Singapore (0459 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR=EBS $1.2224 $1.2248 -0.19% +9.04% +1.2250 +1.2220 Dollar/Yen JPY=D3 103.4450 103.3550 +0.09% -4.76% +103.4750 +103.3200 Euro/Yen EURJPY= 126.44 126.45 -0.01% +3.68% +126.5500 +126.3600 Dollar/Swiss CHF=EBS 0.8865 0.8859 +0.06% -8.40% +0.8868 +0.8855 Sterling/Dollar GBP=D3 1.3388 1.3471 -0.60% +0.96% +1.3467 +1.3380 Dollar/Canadian CAD=D3 1.2873 1.2858 +0.12% -0.90% +1.2876 +1.2845 Aussie/Dollar AUD=D3 0.7557 0.7587 -0.39% +7.71% +0.7590 +0.7552 NZ NZD=D3 0.7055 0.7096 -0.56% +4.86% +0.7105 +0.7056 Dollar/DollarAll spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX
