Dollar falls to 2018 lows as vaccine progress fuels risk demand

The dollar has fallen more than 11% from its record high in March as investors cheer the prospect of a viable vaccine and prospects of improving global growth.

The dollar dropped to a two-and-a-half year low as fast-tracked plans to roll out a coronavirus vaccine in the US bolstered appetite for risk assets.

Currency traders watch computer monitors near screens showing the Korea Composite Stock Price Index (KOSPI), left, and the foreign exchange rate between US dollar and South Korean won at the foreign exchange dealing room in Seoul, South Korea, Monday, Nov. 23, 2020. (AP File Photo)

The Bloomberg Dollar Spot Index fell as much as 0.2% to an April 2018 low after US officials said vaccinations may start in less than three weeks. New Zealand’s dollar, the pound and the Norwegian krone led gains against the greenback in Asia trading Monday.

“The vaccine news is favoring the view of a sooner-rather-than-later global economic recovery with the USD losing its safe haven appeal along the way,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “This is a risk-positive, USD-negative backdrop, especially with the Fed likely to remain ultra-dovish for some time.”

The dollar has fallen more than 11% from its record high in March as investors cheer the prospect of a viable vaccine and prospects of improving global growth. Morgan Stanley recommends selling the dollar in favor of stocks and credit, while Goldman Sachs Group Inc. prefers shorting the US currency against developing nation peers including the Mexican peso and South African rand.

“Fund flows are now showing the expected rotation into EM FX,” Goldman strategists including Zach Pandl wrote in a note. “We would be reluctant to back away from USD shorts with that important tailwind now in place.”