US Dollar Trades Weak as Market Sentiment Boosted by Vaccine Rollouts

Early on Monday, the US dollar is trading weaker against its riskier counterparts as the market sentiment turns positive over hopes that the global economy could begin recovering from the damage caused by the coronavirus pandemic. At the time of writing, the US dollar index DXY is trading around 90.35.

The safe haven appeal of the US dollar has been dented as the economic outlook strengthens, sending commodity currencies like the AUD and NZD higher. The GBP has also been making gains against the greenback over recent sessions as markets cheer the COVID-19 vaccine rollout makes progress across the UK and could bring an end to lockdowns.

The AUD, meanwhile, is trading bullish as Australia begins rolling out the COVID-19 vaccine. Ratings agency Fitch maintained Australia’s credit rating at AAA with a negative outlook, stating that the rollout of the vaccine could support the country’s economic recovery this year.

Net short positions in the US dollar have been on the decline for four consecutive weeks, falling to the lowest level seen since mid-December during the past week. The data indicates some amount of optimism for the reserve currency and could be supported by a strengthening in US Treasury yields and hopes for rapid economic recovery, powered by stimulus measures and vaccine rollouts.