Dollar down over increasing hopes for COVID-19 recovery

LONDON: The dollar was down on Friday morning in Asia, after investors retreated from the safe-haven asset amid growing hopes of a COVID-19 recovery and caused markets to be heavily short dollars.The pound was up despite doubts on both sides about a resolution to the Brexit trade talks between the U.K. and the European Union (EU).
The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged down 0.18% to 90.653 by 12:02 AM ET (4:02 AM GMT). The dollar was pinned near a two-and-a-half year low, barely a third of one percent above the previous week’s 31-month trough.
The USD/JPY pair edged down 0.14% to 104.06.
Although moves in Friday’s Asian session were modest, the riskier AUD and the NZD saw new multi-year highs.
The AUD/USD pair gained 0.35% to 0.7560. The AUD pushed past the 75 U.S. cents mark, the first time since mid-2018, as iron ore, Australia’s biggest export commodity, saw prices surge to a two-and-a-half year high.
“With the iron ore price on a bull run, the Aussie is largely ignoring ‘bad’ news,” Commonwealth Bank of Australia (OTC:CMWAY) currency analyst Joe Capurso told Reuters.
Across the Tasman Sea, the NZD/USD pair inched up 0.10% to 0.7103, while the USD/CNY pair inched down 0.07% to 6.5389.
The GBP/USD pair was up 0.21% to 1.3321, with U.K. and EU negotiators taking a final stab at reaching a Brexit trade deal.
The pound fell 0.8% during the previous session after U.K. Prime Minister Boris Johnson warned on Thursday there was “a strong possibility” that the U.K. and the EU would fail to strike a deal. It has shed 1% so far during the week, with efforts to strike a deal with the EU before protections on around $1 trillion in annual trade expire at the end of December showing little progress up to now.
Johnson and European Commission President Ursula von der Leyen, who has described the talks as “difficult,” have set a deadline for Sunday for the talks. This gives investors the weekend to make any last-minute adjustments to their sterling positions ahead of the deadline.
The widely-expected volatile ride to the finish line has sent pound volatility gauges soaring. One-week volatility saw a new eight-month high, with the premium of puts to calls is near its highest since April as investors coughed up cash for downside protection.
“There has been a greater tendency for more jittery sterling longs to hit the sell button, although (the) market view remains that a deal is slightly more likely than not,” Axi chief strategist Stephen Innes told Reuters.