US dollar falls to 2018 lows amid covid vaccine optimism

The dollar dropped to a two-and-a-half year low as the prospect of vaccine roll-outs added to headwinds for the world’s reserve currency. 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. “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. “This is a risk-positive, USD-negative backdrop, especially with the Fed likely to remain ultra-dovish for some time.” An inoculation that offers adequate protection against infection could help power a rebound in global growth and add momentum to a rally in equities and other riskier investments. 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. ‘Weakening bias’ “Global economic recoveries can correspond with dollar bear cycles, as safe-haven flows to the U.S. decrease and investment opportunities beyond the U.S. increase,” said Stephen Innes, a strategist at Axi.