· Dollar rises as new Covid strain in the UK rattles confidence
The dollar was firm on Tuesday but was well below peaks hit on Monday’s wild ride higher, as a new coronavirus strain in Britain sent jitters through holiday-thinned currency markets.
Sterling and the New Zealand dollar fell half a percent in cautious trade in Asia, the Australian dollar fell 0.4% and the euro was 0.2% softer at $1.2228.
At $1.3308, the pound was still nearly two cents clear of a 10-day low made on Monday, when it briefly lost as much as 2.5% after the virus mutation prompted countries to cut travel links with Britain and as Brexit trade talks stalled.
Low liquidity, with many traders logged out for the year, exaggerated the speed and size of the dollar’s gains against other currencies, too, as stop-loss mechanisms dumped investors out of bets against the greenback.
The moves unwound over the New York session, as a Bloomberg report hinted at progress in Brexit trade negotiations and as Congress settled on a U.S. stimulus package, encouraging investors to buy back in to the dollar’s downtrend.
The euro is a cent above its Monday low of $1.2130.
Experts said there was no evidence that vaccines would not protect against the new virus variant, but Britain’s chief scientific adviser said that in the meantime tighter restrictions on public life in Britain were likely.
Britain also faces food shortages because countries across the globe have locked their borders to the country to try and contain the highly-infectious strain.
Breathe
The whippy price moves, even in light trade, highlight the risks in a market that is heavily short dollars and pricing a pandemic recovery that lifts commodity prices and benefits exporters and their currencies at the expense of the greenback.
The value of overall bets against the dollar eased a fraction last week, positioning data showed, but remains near nine-year highs struck in September.
A downtrend that has the dollar index on course for a third consecutive quarterly loss and has carried it some 12.5% lower from a March peak has left it both irresistible to momentum funds and overdue for a pause.
The index, which measures the dollar against a basket of six major currencies was last up 0.2% at 90.259 though beneath its Monday top of 90.978. That is 0.6% above a 2-1/2 year trough of 89.723 it hit last week.
“Medium-term trends still favor (being) short dollars, short U.S. Treasuries and long commodities. The recent dollar index break below 90 supports our view that dollar weakness can persist next year,” said Bank of America analyst Paul Ciana.
But, he added, big recent gains in currencies such as the Aussie dollar, the Swiss franc and Chinese yuan mean a pullback might be due.
“These are warning signs the dollar selloff may take a breather or bounce in the next two to four weeks.”
The yuan, which has gained nearly 10% on the dollar since a March low has been steady for about a week now and was a fraction softer at 6.5433 per dollar on Tuesday.
· U.S. Senate passes $892 billion coronavirus aid bill, sends to Trump to sign
The U.S. Senate on Monday passed an $892 billion coronavirus aid package, throwing a lifeline to the nation’s pandemic-battered economy, while also funding federal government activities through September 2021.
The House of Representatives passed the measure earlier on Monday. It now heads to President Donald Trump to sign into law.
Congress passes long-awaited Covid relief bill and government funding plan
Congress passed a mammoth coronavirus relief and government spending package Monday night as it moves to inject long-delayed aid into the fight against a once-in-a-century health and economic crisis.
Both chambers easily approved the more than $2 trillion legislation in votes that dragged late into the night. Congressional leaders attached $900 billion in pandemic aid to a $1.4 trillion measure to fund the government through Sept. 30.
The House approved the package in a 359-53 vote. The Senate then passed it by a 92-6 margin.
At the same time, Congress passed a seven-day stopgap spending bill to keep the government open during the time it takes for the full-year legislation to get to President Donald Trump’s desk.
· California could see 100,000 hospitalizations in January as state records 500,000 COVID-19 cases in 2 weeks
California has recorded a half-million coronavirus cases in the last two weeks and in a month could be facing a once-unthinkable caseload of nearly 100,000 hospitalizations, Gov. Gavin Newsom and the state’s top health official said Monday.
Gov. Gavin Newsom, himself quarantined for the second time in two months, acknowledged that a state projection model shows hospitalizations in that range and said he’s likely to extend his stay-at-home order for much of the state next week.
· U.S. Could Require Negative COVID-19 Tests for Passengers From Britain - Sources
The U.S. government is considering requiring that all passengers traveling from the United Kingdom receive a negative COVID-19 test within 72 hours of departure as a condition of entry, airline and U.S. officials briefed on the matter said Monday.
A White House coronavirus task force discussed requiring pre-flight tests after a meeting on Monday regarding the emergence of a highly infectious new coronavirus strain in Britain that prompted dozens of countries to close their borders to Britain.
Airline and U.S. officials said requiring testing for UK arrivals won backing among task force members. The White House has yet to make a final decision on the matter, they said.
· Britain faces isolation as world tightens borders to keep out new coronavirus strain
Countries across the globe shut their borders to Britain on Monday due to fears about a highly infectious new coronavirus strain, causing travel chaos and raising the prospect of food shortages days before Britain is set to leave the European Union.
India, Pakistan, Poland, Spain, Switzerland, Sweden, Russia, Jordan and Hong Kong suspended travel for Britons after Prime Minister Boris Johnson said a mutated variant of the virus had been identified in the country. Saudi Arabia, Kuwait and Oman closed their borders completely.
Several other nations blocked travel from Britain over the weekend, including France, Germany, Italy, the Netherlands, Austria, Ireland, Belgium and Canada - although experts said the strain may already be circulating in countries with less advanced detection methods than the United Kingdom.
France shut its border to arrivals of people and trucks from Britain, closing off one of the most important trade arteries with mainland Europe.
Trucks backed up for miles on the highway leading to the port of Dover, Britain’s main trade gateway with the continent and thousands of Europe-bound drivers were stranded.
· UK, France to set out plan to restart freight -BBC
The measures will come into effect from Wednesday, the BBC said, citing French Europe Minister Clement Beaune.
· German consumer morale falls further as lockdown pushes up savings rate
German consumer morale fell a third month in a row heading into January as a stricter lockdown to contain a surge in coronavirus infections reduced income expectations and increased the propensity to save, a survey showed on Tuesday.
The GfK research institute said its consumer sentiment index, based on a survey of around 2,000 Germans, fell to -7.3 points from a revised -6.8 in the previous month.
This marked the lowest reading since July and came in slightly better than a Reuters forecast of -8.8.
· Japan PM Suga aims to meet with Biden as soon as possible
Japanese Prime Minister Yoshihide Suga said on Tuesday he wanted to meet with U.S. President-elect Joe Biden as soon as possible to discuss the U.S.-Japan security alliance, the coronavirus pandemic and global warming.
· Oil's rally, fueled by vaccine progress, is running out of steam
The oil market has rallied almost 40% in the last two months, pushing benchmarks to nine-month highs, in a euphoric response to progress on COVID-19 vaccines that has investors thinking the end of the coronavirus pandemic is in sight.
Reality struck back on Monday, however, with a selloff driven by the surge in cases in the United Kingdom. Infection rates are at their worst levels in numerous countries and vaccine distribution is proving to be slow, which means the cycles of lockdowns and travel restrictions will continue - keeping fuel demand tepid for many months.
That means the bulk of the rally is already in the rearview mirror, traders and brokers said. Brent crude hit a nine-month high of $52.48 a barrel last week, but gave back as much as 4% on Monday, while U.S. crude prices exceeded $49 a barrel before slipping.
“Even when traders see stability, there is always something unexpected that can happen, and then inflated prices reveal their glass legs,” Rystad Energy’s oil markets analyst Louise Dickson said.
· Oil drops as new coronavirus strain triggers demand recovery fears
Oil prices dropped further on Tuesday, adding to steep losses from the previous session, as a new strain of the novel coronavirus in the United Kingdom triggered concerns over fuel demand recovery.
The fast-spreading new coronavirus strain has shut down much of Britain, and has prompted several countries to close their borders to British travellers and freight.
Brent crude futures were down 54 cents, or 1.1% to $50.37 a barrel at 0531 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell 59 cents, or 1.2%, to $47.38 a barrel.
Both benchmark contracts slid nearly 3% on Monday, partly erasing recent strong gains on the back of the rollout of COVID-19 vaccines, seen as key to easing mobility restrictions.
Reference: Reuters, CNBC
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