Dollar under pressure in Europe

• Bitcoin surges above $18,000

LONDON: The dollar remained under pressure on Wednesday and briefly dropped to its lowest in over a week as tighter economic restrictions across the United States and Europe tested market optimism over vaccine trials.

Pfizer announced that the final results from the late-stage trial of its Covid-19 vaccine showed it was 95% effective. But that had little effect on the dollar amid concern more monetary stimulus is to be expected from the Federal Reserve.

Fed Chair Jerome Powell said on Tuesday there was “a long way to go” to economic recovery and a retail sales report released by the US Commerce Department showed spending decelerating.

“Markets are mindful that the Fed is in play”, said Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets.

Against a basket of currencies, the dollar eased 0.1% to 92.327 after dropping as low as 92.207, its lowest level since Nov. 9.

Bitcoin, sometimes regarded as a safe haven, or at least a hedge against inflation, rose to more than $18,000 for the first time in nearly three years. It last stood around $18,200, up over 3%.

The euro was rising about 0.1% at $1.186, apparently unconcerned that Poland and Hungary are blocking the European Union’s 1.8 trillion-euro ($2.14 trillion) financial package to revive an economy depressed by the Covid-19 pandemic.

“It seems likely that in December ... the EU will accept a compromise on the breach of the rule of law so that both countries can then save face and still accept the EU budget and the recovery fund”, Commerzbank strategist Antje Praefcke said. “And all will live happily ever after - and therefore no reason to sell the euro.”

Budapest and Warsaw vetoed the adoption of the 1.1 trillion- euro 2021-2027 EU budget and the 750 billion-euro recovery fund on Monday because the budget law included a clause that makes access to money conditional on respecting the rule of law.

On the Brexit front, UK Business Secretary Alok Sharma said Britain hoped to get a Brexit trade deal but that the EU had to understand it was dealing with a sovereign nation.

The statement came after the Sun newspaper reported that Prime Minister Boris Johnson was told by British negotiators to expect a Brussels trade deal early next week, with “a possible landing zone” as soon as next Tuesday.

Sterling was rising about 0.2% to $1.3277, near peaks reached in early September.

British inflation picked up by more than expected in October, pushed higher by prices for clothing and footwear and food as coronavirus restrictions tightened in much of the country.

Amid the uncertainty over the global economic recovery, the safe-haven Japanese yen climbed to a one-week high.

At 103.95 per dollar, the yen came back to its Nov. 9 levels, recouping much of the losses it suffered last week after Pfizer announced it had developed a working Covid-19 vaccine.

China’s yuan held near a 29-month high against the dollar, finishing at its highest since June 26, 2018, despite dollar buying by major state-owned banks in what some traders suspected was an effort to slow the Chinese currency’s advance towards 6.5-per to the dollar.