Dollar Up, but Near One-Week Low Over Receding COVID-19 Fears

© Reuters.

By Gina Lee

AiVIF.com – The dollar was up on Wednesday morning in Asia, trading near a one-week low. Investors are turning away from the safe-haven asset as COVID-19 concerns that clouded the economic recovery outlook eased.

The U.S. Dollar Index tracking the greenback against a basket of other currencies edged up 0.16% to 93.045 by 11:12 PM ET (3:12 AM GMT). It fell to 92.804 on Tuesday, the first time it has done so since Aug. 17.

The USD/JPY pair edged up 0.17% to 109.81.

The AUD/USD pair edged down 0.20% to 0.7243 and the NZD/USD pair edged down 0.12% to 0.6940.

The USD/CNY pair edged up 0.12% to 6.4787 while the GBP/USD pair inched down 0.07% to 1.3717.

The U.S. FDA’s full approval of the Pfizer Inc. (NYSE:PFE)/BioNTech SE (F:22UAy) COVID-19 vaccine earlier in the week has raised hopes that inoculations rates will rise and has increased the global risk appetite. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases and the chief medical advisor to the President, even predicted that the U.S. could have COVID-19 under control by early 2022 if vaccination rates rise.

The U.S. currency has rallied in recent weeks, even hitting a nine-and-a-half month high of 93.734 during the previous week. Concerns about the global spread of COVID-19, and the Delta variant particularly, alongside signs that the U.S. Federal Reserve could start asset tapering later in 2021, contributed to this rally.

However, some investors are betting that the continuing spread of COVID-19 will diminish the chances that the Fed will announce a timeline for both asset tapering and interest rate hikes at its’ annual Jackon Hole symposium, taking place from Aug. 26 to 28.

"The tide of optimism seems to have set in," lifting commodity currencies at the dollar's expense, National Australia Bank (OTC:NABZY) analyst Tapas Strickland said in a note.

Jackson Hole "looms as the next key test," but "given the uncertainty it is likely the Fed needs to see another one or two stellar payroll prints, though an asset taper announcement in 2021 is still likely," the note added.