By Elizabeth Howcroft
LONDON, Aug 24 (Reuters) – The dollar was steady on Tuesday, near the previous session’s five-day low, as markets appeared less concerned by the spread of the Delta coronavirus variant while risk-related currencies benefited from rising commodity prices.
Risk appetite in global markets strengthened after the U.S.
Food and Drug Administration granted full approval to the COVID-19 vaccine developed by Pfizer and BioNTech in a move that could accelerate inoculations in the United States. A bounce in China’s technology sector also contributed to risk-on sentiment.
Rising COVID-19 infections caused by the highly contagious Delta variant have fuelled concerns about the recovery from the global health crisis.
But markets have largely overlooked that this week, with analysts citing thin liquidity as a factor driving apparent swings in risk appetite.
«We´re definitely in a mood where concerns about COVID are not driving the market,» said Kit Juckes, head of FX strategy at Societe Generale.
At 1131 GMT the dollar index was flat at 92.998.
It hit a five-day low of 92.947 on Monday, registering its largest one-day drop since May.
The euro was down about 0.1% against the dollar at $1.17385 .
Market attention is focused on the Jackson Hole conference on Friday, at which some investors expect U.S.
Federal Reserve Chair Jerome Powell to give hints on a possible timeline for tapering of monetary stimulus.
«The uncertainty over the spread of the Delta variant and how local authorities will respond has certainly created a sense of ‘short-termism’ in FX markets,» ING strategists wrote in a note to clients.
«We think investors will want to wait to hear on this subject from Jerome Powell on Friday before pushing ahead with another major round of risk-buying, dollar-selling.»
But SocGen’s Juckes said the market reaction may be limited because Powell’s speech is on a Friday afternoon in European time.
COVID-19 case counts are also being watched closely, particularly in China and New Zealand.
Outbreaks in China appear to be coming under control while New Zealand, where monetary policy was put on hold last week, is in lockdown to contain the Delta variant.
The Australian dollar, viewed as a liquid proxy for risk appetite, was up 0.4% at $0.72425.
The New Zealand dollar was up 0.8% at a one-week high of $0.6946, boosted by comments from the Reserve Bank of New Zealand’s assistant governor, who said that policymakers had actively considered raising interest rates last week.
The RBNZ left rates on hold at a record-low 0.25% but flagged a tightening before the end of the year.
A senior central bank official on Monday said the latest coronavirus outbreak in New Zealand is not a «game changer» yet and there is no pressure to act on monetary policy.
Firmer commodity prices also helped the Australian and New Zealand dollars earlier in the session.
The Norwegian dollar was up 0.6% against the euro, with the pair changing hands at 10.4053, while the Canadian dollar was up 0.2% against the U.S.
Elsewhere, bitcoin edged back below $50,000, which was breached for the first time since May on Monday. At 1136 GMT the digital currency was up 0.5% at about $49,305.
(Reporting by Elizabeth Howcroft Editing by Angus MacSwan and David Goodman)