FILE PHOTO: A U.S. Dollar banknote is seen in this illustration taken May 26, 2020. REUTERS/Dado Ruvic/Illustration
November 23, 2020
By Karen Brettell
NEW YORK (Reuters) – The dollar bounced off an almost three-month low against a basket of currencies hit on Monday following optimism over another COVID-19 vaccine as the index approached a technical support level that if broken, could signal further weakness for the greenback.
The dollar had weakened as risk appetite got a boost after AstraZeneca said that its vaccine could be about 90% effective and it would prepare to submit data to authorities around the world that have a framework for conditional or early approval.
“At least for now the news from AstroZeneca is helping to overshadow concerns about the economic fallout from mounting business restrictions,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
However, “the lingering downside threat to growth may help slow the dollar’s decline”, Manimbo said.
Investors are balancing the prospect of a closer rollout of COVID-19 vaccines against worsening U.S. economic data as a rise in COVID-19 cases again leads to business shutdowns.
The dollar index was last up 0.05% at 92.366, after earlier dropping to 92.013, the lowest since Sept. 1. It is hovering just above technical support around 92, a conclusive break below which could usher in new weakness, analysts said.
Matthew Maley, chief market strategist at Miller Tabak noted that he would wait for confirmation that any break below 92 is significant before assuming further weakness, but added that if the index does fall below that level “in any meaningful way, it’s going to be very bearish for the greenback on a technical basis”.
Analysts at Brown Brothers Harriman said that if the index breaks its September low, there is little support until its low from February 2018.
The Reuters dollar index showed the greenback falling to a more than two-year low of 91.737 on Sept. 1. It fell to 88.251 in February 2018, which was the lowest since December 2014.
The euro was last down 0.01% at $1.1855.
Based on the dollar index, the next target for the euro is likely its September high near $1.2010, followed by the February 2018 high of $1.2555, Brown Brothers Harriman said.
The New Zealand dollar surged to a two-year high after strong retail sales data, before falling back to be little changed on the day at 0.6930 per dollar.
The pound was boosted by hopes for a Brexit deal. The EU’s chief Brexit negotiator said that fundamental divergences remain but both sides were pushing hard for a deal.
Sterling was last 0.44% up at $1.3349.
(This story corrects index in eleventh paragraph to remove reference to Reuters index)
(Additional reporting by Elizabeth Howcroft in London; editing by Emelia Sithole-Matarise)