Increased risk appetite buoyed trade-related currencies amid more optimism for the world economy on Monday after Joe Biden clinched the US presidency and Pfizer Inc said its experimental vaccine was more
than 90% effective in preventing COVID-19.
The Japanese yen and Scandinavian currencies were among the biggest movers, while the offshore Chinese yuan hit its strongest in 28 months.
The safe-haven yen gave way to the new optimism, weakening to its lowest level in more than two weeks, while the yuan strengthened on confidence in more trade.
A Biden presidency is expected to shore up international trade relations and the prospect of a successful coronavirus vaccine is seen as a major tailwind, with global cases continuing to rise.
The vaccine news “provided just a tremendous boost for risk appetite,” said Ed Moya, senior market analyst at foreign exchange broker OANDA.
“There was a lot of nervousness in investors’ expectations for these vaccine trial results, and the first one out of the gates had an amazing 90% effective rate, far exceeding the consensus,” Moya said.
“The last remaining risk event of the year, it seems like it has been taken off the table. We’re seeing a big reflation trade here.”
Bond yields soared in the United States and Europe, and major stock indexes gained as much as 4%.
The vaccine news, said Simon Harvey, currency analyst at broker Monex Europe, “helped boost global growth expectations which took a substantial knock only weeks ago with second wave concerns.”
Also benefiting were the Norwegian and Swedish crowns and other currencies which react more quickly to economic changes.
The Swedish crown rose to a 28-month high against the dollar and the euro. It traded at 8.6014 versus the US dollar and reached a 22-month high against the euro.
Its Norwegian counterpart strengthened 1.54% against the dollar and rose against the euro as well, to touch two-month highs against each.
The Australian dollar was up 2.5% at 76.94 against the Japanese yen, a seven-week high. The yen also fell
1.6% against the US dollar to 105.
The offshore Chinese yuan was not far behind, hitting a peak of 6.5501 against the dollar and last up 0.12% at 6.6012.
The Canadian and Australian dollars both rose as much as 0.8% versus the US dollar, with the latter hitting a seven-week high and the former a nine-month high.
Amid those changes, the dollar stabilised against a basket of currencies, having touched a 10-week low of 92.12, and was last up 0.4% at 92.561.
