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FOREX-Dollar snaps out of three straight weeks of decline

Published 11/12/2020, 08:10 pm
Updated 11/12/2020, 08:12 pm
© Reuters.
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* Dollar remains close to 2018 lows

* Sterling on edge heading in to crucial Brexit weekend

* Investor take shelter in safe haven Swiss franc

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Julien Ponthus

LONDON, Dec 11 (Reuters) - Pressure was easing on the dollar on Friday, with the currency set to snap out of three straight weeks of losses while sterling still suffered due to fears a post-Brexit trade deal might not be reached before the end of 2020.

Overnight, hopes of a global economic rebound and a fading pandemic in 2021 saw investors taking bets on riskier currencies linked to rising commodity prices.

Surging iron ore prices had lifted the Australian dollar AUD= to a two-and-a-half year high of $0.7542.

A nine-month peak for oil prices also had pushed the Canadian dollar CAD= to its highest since 2018.

But at 0900 GMT, pressure was easing on the greenback, which was back up 0.2% against a basket of major currencies, trading at 90.867 but still not far from a two-and-a-half year low of 90.471.

The euro was taking a breather, down 0.12% against the dollar after Thursday's gains when the ECB announced a new round of stimulus in line with markets expectations and EU leaders reached a compromise over a pandemic aid package. common currency has soared 15% from three-year lows at the height of the March markets panic and has added nearly 2% in two weeks since finally breaking $1.20 after multiple attempts.

Sterling GBP= on the other hand was still under pressure in early trading, down about 0.75% at $1.3193 ahead of a weekend of brinkmanship as British and EU negotiators have been told they have until the end of Sunday to decide whether a trade deal is possible. GBP/

The pound has slipped 1.8% this week as British and European leaders have expressed doubts that they will be able to salvage a deal.

But options market moves show traders bracing for chaos, with one-week implied volatility GBPSWO= at a new eight-month high and the premium of sterling puts to calls GBP1MRR= near its highest since April as investors pay up for downside protection.

"In addition to Sterling the Swiss franc is the main victim of the rising Brexit uncertainty - the difference being that it is under appreciation rather depreciation pressure, which is unlikely to please the Swiss National Bank though", Commerzbank (DE:CBKG) analyst Thu Lan Nguyen.

The Swiss franc is trading at a 2015 high against the dollar, and was rising 0.28% at $0.8854.

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