The US dollar kicked off 2021 on the back foot as investors bet that the world’s pandemic recovery will boost other currencies.
The euro rallied 0.3% to $1.2252. The pound targeted the multi-year high of $1.37and the Chinese yuan rose 0.9% to a 30-month high of 6.4647 per dollar.
The safe-haven yen rose 0.3% to 102.94 after Japan’s Prime Minister said his government is considering a state of emergency in Tokyo as covid cases rise.
Expectations of prolonged low U.S. interest rates, massive U.S. budget and trade deficits together with the belief that recovering global trade will drive non-dollar currencies higher have resulted in the greenback spiraling lower.
The dollar index fell 13% from its 2020 peak in March to the end of the year – its first annual loss since 2017. At the time of writing it trades -0.08% weaker at 89.688, just above a more than 2-1/2 year low of 89.515 hit last week.
The weaker dollar boosted commodity prices and lifted bitcoin in addition to several Asian currencies to milestone highs.
Minutes of the Federal Reserve’s December meeting due on Wednesday could offer further guidance over the Fed’s next moves..
Data wise, manufacturing surveys across the globe are due, which will reveal how the sector is coping with the spread of the coronavirus.