The dollar weakens as market optimism lifts more risky currencies

LONDON (Reuters) – The US dollar held close to two-week lows on Monday as optimism surrounding COVID-19 vaccine rollout and a planned $ 1.1 trillion US stimulus package offered a boost to more risky currencies, stock markets and commodity prices.

FILE PHOTO: Representations of virtual currency Bitcoin are placed on US dollar bills in this illustration taken May 26, 2020. REUTERS / Dado Ruvic / Illustration

Among the weaker-dollar winners, the British pound broke $ 1.39 for the first time in almost three years, aided by expectations that the success of Britain’s COVID-19 vaccination program could enable the economy to open up and come back .

The offshore-traded Chinese yuan continued its recent rise and was breaking above $ 6.39 per dollar for the first time since June 2018.

Commodity currencies also strengthened, with the South African rand touching a one – year high. The Norwegian krone and the Australian dollar reached their highest levels in three weeks against the greenback.

Many financial markets in Asia remained closed Monday through the new year, and US stock markets were closed for President’s Day.

The dollar index slid 0.1% to close to last week’s low of 90,249 – a level not seen since January 27.

Analysts at MUFG said the dollar could weaken further if market optimism held.

“We believe that much has not yet gone into the so-called ‘reflection trade’ with market participants, which underestimates the willingness of global decision-makers to keep the economy warm and provide stronger-than-expected global growth for the rest of the year.” Said the analysts in a note.

Speculators maintained their short dollar positions, the latest data from the US Commodity Futures Trading Commission showed with a net card value of $ 29.53 billion.

The Japanese yen, seen as a safe haven, slipped 0.4% against the greenback to 105.27 yen,

The euro rose 0.1% higher to $ 1.21310 and extended last week’s advance by 0.6%.

Bitcoin remained volatile, retreating to as low as $ 45,914.75 a day after reaching a record high of $ 49,714.66.

The world’s most popular cryptocurrency totaled 25% last week, boosted by endorsements from Tesla and BNY Mellon.

Reporting by Iain Withers, further reporting by Sujata Rao; editing by Kirsten Donovan, Larry King and Susan Fenton

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