By Peter Nurse
Investing.com - The dollar headed lower in early European trading Tuesday, falling to a three-week low, as traders turned to riskier currencies amid growing optimism about an economic recovery as the global vaccination program accelerates.
At 3:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 90.347, after earlier falling to 90.210, its lowest since Jan. 27.
EUR/USD climbed 0.1% to 1.2133, USD/JPY rose 0.1% to 105.50, the risk-sensitive AUD/USD rose 0.1% to 0.7780, after hitting a one-month high of 0.7805, while the Chinese yuan dropped 0.2% to 6.4149 per dollar in the offshore market after the Financial Times reported Beijing is exploring curbs on rare earth mineral exports in order to hurt the U.S. firms that use them.
“Looking across global asset markets it seems confidence is growing in the global recovery,” said analysts at ING, in a research note.
The release of the minutes of the January FOMC meeting on Wednesday will be studied carefully for clues as to when the central bank will decide to remove the extreme cheap liquidity which has supported the economy since the pandemic hit.
“Our core stance is that the Fed is prepared to let the economy run hot – that’s the whole point of Average Inflation Targeting – and that the dollar should stay broadly offered,” ING added.”Indeed, we’re looking for another broad leg of the dollar decline into 2Q as vaccine rollouts broaden around the globe.”
Elsewhere, GBP/USD rose 0.1% to 1.3913, after earlier hitting 1.3951, its highest level since April 2018. The currency has gained almost 3% from early-February lows, helped by the U.K.’s impressive Covid-19 vaccination program - hitting its target of 15 million people vaccinated on Sunday.
“This is probably a good reason to buy GBP since the UK will be free from restrictions earlier than the EU. Even if it is already partly a consensus story, we still find more potential in the GBP bet,” said analysts at Nordea, in a research note.