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Fading Vaccine Hopes Put the Brakes on the Dollars Resurgence

November 11, 2020

The U.S.dollars resurgence was put on hold on Wednesday as hopes of a coronavirus vaccine were offset by concerns about how the drug will be delivered and by a surge of new infections in the United States.

Eyes are on the New Zealand dollar ahead of a central bank meeting later on Wednesday that may shed light on whether policymakers will adopt negative interest rates. Still, I foresee little chance of that happening.

Initial optimism about coronavirus vaccine testing saw the dollar surge up against the safe-harbour yen and the Swiss franc. However, momentum is now starting to fade because there are still several obstacles to clear before a vaccine can be distributed.

It seems the dollar recovery is on hold for now because, after looking at the details, there are still a lot of hurdles to clear before any vaccine is rolled out, However, the dollar is supported by rising Treasury yields, which should help the dollar make another push higher before year’s end.

The dollar was last quoted at 105.23 yen trading near a three-week high, while Against the euro the dollar was little changed at $1.1820.
The British pound traded at $1.3260, close to a two-month high due to growing optimism that Britain and the European Union will agree to a long-sought-after trade deal.

Sentiment for the dollar grew after Pfizer claimed a 90% success trial rate for the vaccine. However, the consensus across financial markets has become mixed because there are several logistical hurdles to making the drug available, including that it has to be shipped at freezing temperatures.

Several states in the U.S. have recently imposed restrictions to curb the spread of the coronavirus as hospitalizations soared, highlighting the difficulty in containing the virus as winter in the Northern Hemisphere approaches.

Elsewhere, the New Zealand dollar has been trading near its highest level against the dollar in over a year ahead of the New Zealand policy meeting that may provide answers about the possibility of negative interest rates.

The central bank is expected to hold rates at 0.25% and introduce a new monetary policy tool to drive borrowing costs lower for lenders.

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