- Dollar index up nearly 1% this week
- Kiwi firm as investors trim bets on negative rates
- Mood turns more risk averse in late in Asia trade
- Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E
The dollar held broad gains 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= rose 0.1% through the Asia session, the euro EUR= fell by the same margin and the risk-sensitive Australian and New Zealand dollars ground about 0.3% lower.
Europe is already grappling with surging infections and new social restrictions, contributing to 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.
"In the absence of a COVID-19 vaccine, the risk of more stringent restrictions, including localised or nationwide lockdowns, is real," said Commonwealth Bank of Australia currency analyst Carol Kong of the U.S. situation.
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 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 central banking forum later on Thursday.
"On the relative macro front, Europe is still on a weaker footing compared to U.S.," said OCBC Bank strategist Terence Wu, who believes the dollar's decline is running out of steam.
"We also view the resilience in the Australian dollar with some skepticism, and look to turn short on the Aussie if there are signs that equities are losing steam."
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 turned less convinced that negative rates are a sure thing anymore for New Zealand.
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.
"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.
======================================================== Currency bid prices at 6:15PM in Sydney (715713 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR=EBS $1.1771 $1.1779 -0.06% +5.00% +1.1787 +1.1759 Dollar/Yen JPY=D3 105.2550 105.6400 -0.35% -3.08% +105.4750 +105.1600 Euro/Yen EURJPY= 123.89 124.15 -0.21% +1.59% +124.2200 +123.6900 Dollar/Swiss CHF=EBS 0.9168 0.9169 -0.02% -5.27% +0.9170 +0.9157 Sterling/Dollar GBP=D3 1.3192 1.3223 -0.23% -0.54% +1.3227 +1.3182 Dollar/Canadian CAD=D3 1.3093 1.3062 +0.24% +0.79% +1.3102 +1.3059 Aussie/Dollar AUD=D3 0.7263 0.7281 -0.23% +3.52% +0.7293 +0.7254 NZ NZD=D3 0.6870 0.6883 -0.16% +2.13% +0.6914 +0.6863 Dollar/DollarAll spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX
