SINGAPORE- The US dollar was pinned down on Tuesday, as vaccine optimism boosted the British pound to an almost three-year high, while rising oil prices and buoyant expectations for global recovery supported commodity and trade-exposed currencies.
In trade thinned by Lunar New Year holidays in China and Monday’s US holiday, the positive mood also weighed on the safe-haven yen which made a one-week low on the dollar overnight and fell to more than two-year lows on the euro and the Aussie.
The US dollar index, which measures the dollar against a basket of six major currencies, sat at 90.351, not far above a two-week low it struck last Wednesday.
The Chinese yuan, a favored vehicle for playing the dollar’s weakness in Asia, was on the brink of strengthening past 6.4 per dollar for the first time since mid-2018 and last stood at 6.4033 in offshore trade.
The risk-sensitive Australian dollar held near Monday’s one-month high at $0.7785.
“The dollar tends to underperform when you see this broad positive sentiment in markets,” said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney.
“There are also inflationary pressures particularly coming from energy prices,” he said, which is pushing up nominal yields – adding another weight on the yen as that can attract flows from Japan – but keeping real returns on Treasuries steady.