Vaccine hopes boost euro, dollar on back foot as yields off highs

The dollar wallowed near a six-week low against its peers on Tuesday as the euro led a rally on the back of a brightening outlook for the region's vaccination programme.
Vaccine hopes boost euro, dollar on back foot as yields off highs
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The dollar had already been losing traction as U.S. bond yields have hovered below a 14-month peak touched last month, reducing the greenback's yield attraction. The euro rose to $1.2038, having touched a six-week high of $1.2048 on Monday while the British pound gained 1% overnight, its second biggest daily gain so far this year, and last stood at $1.3989.
Some analysts say support for the euro likely came from the announcement that the European Union has secured an additional 100 million doses of COVID-19 vaccine by BioNTech and Pfizer. "Europe is really the main region which is going to see accelerating vaccinations this quarter. And later in the year, we will see accelerating vaccinations, broadly, in emerging market economies," Zach Pandl, co-head of foreign exchange strategy for Goldman Sachs in New York.
"The U.S. got ahead of the curve in the first quarter, but other countries are going to be quickly catching up." The dollar index dropped to 91.085, having lost 2.5% from its five-month peak hit last month.
The moves are the reverse of what was happening in the first three months of the year when the dollar gained against the very same major currencies as yields rose on U.S. Treasuries and offered higher returns on the greenback. Against the yen, the dollar fell to as low as 107.975 yen, its weakest in more than six weeks, and last traded at 108.15 .
The 10-year U.S. Treasuries yield hit a one-month low of 1.529% last week. Though it ticked up to 1.605% by Monday it stood well below its March peak of 1.776%, when investors speculated the Federal Reserve could tone down its dovish policy guidance. "One of the probably most important developments in macro markets over the last month has been a stability in U.S. rate . That also opens up room for dollar weakness against a broad set of currencies," said Goldman's Pandl.
The Australian dollar held firm at $0.7769 after hitting a one-month high of $0.7784 on Monday. The offshore Chinese yuan firmed to 6.5075 per dollar, near its highest level in almost one month. Gold also hit a 7-week high of $1,790 per ounce on Monday and last stood at $1,770.6.
Bitcoin changed hands at $54,122, down 1.5% after four straight days of losses.

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