Risk sentiments had taken an unprecedented twist on Wednesday’s FX market, as the American currency had turned tails and cornered to one-month lows following reveal of encouraging media headlines regarding progress in pandemic vaccine, while the market participants’ appetite for riskier assets seemed to have rekindled.
In point of fact, an escalation of a rattling battle over trade between Beijing and Washington, which in normal circumstances would have raised safe-haven bid for the US Dollar, however, Wednesday’s FX and equity markets had overshadowed worries related to Sino-US trade rift and had been largely dominated by the cheering signs of a pandemic vaccine.
Vaccine hopes shreds off US Dollar’s safe-haven bid
Concomitantly, the US-based vaccine manufacturer Moderna was quoted saying on Tuesday that the early stage clinical trial of its vaccine had developed immunity among all of the 45 volunteers against the pandemic pathogen, while a Wednesday report on a vaccine having been developed by the Oxford University had spurred up investors’ optimism further.
Citing statisitcs, on Wednesday’s FX market closure, the American Dollar index (DXY) measured against a basket of six major currencies fell below 96-level for the first time since June and had hit a session low of 95.77, however, had wrapped up the day down by 0.12 per cent to 95.99.
Aside from that, following a rise in crude oil futures’ prices, the commodity-linked assets such as Canadian Dollar added 0.73 per cent, while the assets widely contemplated as a reflection of Chinese economy such as Australian Dollar had hit the $0.70 level, its highest level in more than one month.
Against the American currency, Canadian Dollar ended up the day 0.73 per cent higher to $1.3506, while Australian Dollar and New Zealand Dollar gained 0.43 per cent and 0.46 per cent respectively to $0.7008 and $0.6569. Among other major currencies, the bloc’s common currency had spiked to a four-month peak of $1.1450 against its American peer on Wednesday, however, winded down the day 0.11 per cent higher to $1.1412.
Meanwhile, addressing to a likely medium- to longer-term weakness for the US Dollar lurking on the horizon, Action Economics’ analysts wrote in a client note on Wednesday, “The pair has been floated by a combo of broader dollar softness, which has come amid a risk-on backdrop, and by the recent broad underpinning the euro has seen amid expectations for EU leaders to green-light the proposed 750 billion euro recovery fund this week. ”