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FOREX-Risk currencies hit as souring sentiment boosts dollar

Published 28/01/2021, 08:05 pm
© Reuters.
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* Commodity currencies hit multi-week lows

* Receding risk sentiment leaves dollar winner

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

By Ritvik Carvalho

LONDON, Jan 28 (Reuters) - Riskier currencies such as the commodity-linked Australian dollar, Canadian dollar and the Norwegian crown fell to multi-week lows against the U.S. dollar on Thursday, as souring risk sentiment in global markets boosted the greenback.

Falling stocks on Wall Street on Wednesday, in Asia overnight, and at the open in Europe contributed to a shift in sentiment. .EU .N

By 0852 GMT, the dollar was trading 0.14% higher against a basket of currencies. =USD

It gained against the Aussie AUD=D4 , which lost as much as 0.8% to 76.02 U.S. cents, its lowest level against the buck since Dec. 30.

The neighbouring New Zealand dollar, or Kiwi - fell half a percent to 71.22 U.S. cents. NZD=D4

The Canadian dollar, or loonie, hit its lowest levels in a month, weakening to 1.286 per U.S. dollar. CAD=

Norway's crown slumped to its lowest in five weeks at 8.7226 per dollar, falling as much as 0.8% in early trading in London. NOK=

Analysts note that some of the optimism around vaccines fuelling a recovery in the global economy has evaporated, given that several countries, especially some in Europe, have been slow to roll them out and have faced problems doing so.

The European Union, which is far behind the United States, China and Britain in deploying a vaccine, demanded AstraZeneca spell out how it would supply the bloc with reserved doses of COVID-19 vaccine from plants in Europe and Britain. said on Thursday it must receive all of the COVID-19 vaccines it had ordered and paid for. story of weakness in the European recovery continues," said Lars Sparresø Merklin, senior analyst at Danske Bank.

"A shortfall in vaccines is now at centre stage and risk aversion to European assets from earlier in the week has spread to global assets. The USD has been the natural winner."

There were also expectations of more dour economic news, with data expected to show the U.S. economy likely contracted at its sharpest pace since World War Two in 2020 as COVID-19.

The Commerce Department's snapshot of fourth-quarter gross domestic product on Thursday is also expected to show the recovery from the pandemic losing steam as the year wound down amid a resurgence in coronavirus infections and exhaustion of nearly $3 trillion in relief money from the government.

The Federal Reserve on Wednesday left its benchmark overnight interest rate near zero and pledged to continue injecting money into the economy through bond purchases, noting that "the pace of the recovery in economic activity and employment has moderated in recent months."

Across the pond, the euro hovered below $1.21, down 0.2% on the day EUR=EBS after losing hitting its lowest in over a week against the dollar on Wednesday.

European Central Bank (ECB) policymakers have stepped up their mentions of the euro in recent weeks, with the most recent comments indicating that the ECB could even cut its deposit rate to check the strength of the continent's shared currency.

Sterling fell 0.4% to $1.3637 GBP=D3 .

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