Dollar Near 2018 Lows; COVID-19 Risk

The U.S. dollar held near mid-2018 lows on Monday as bullish sentiment across global markets prompted investors to buy riskier currencies such as the Chinese yuan, despite a resurgent pandemic. Low U.S. interest rates, massive U.S. budget and trade deficits and a belief that rebounding world trade will drive non-dollar currencies higher have set the dollar on a downward course.

The dollar index posted its first annual los9s since 2017 last year. It has fallen roughly 13% from a three-year peak at the height of the pandemic panic in March. It was last 0.14% weaker at 89.640 and not far above last week’s more than two-and-a-half-year low of 89.515.

Manufacturing activity expanded in Japan, South Korea and Taiwan, according to PMI surveys, the latest indication that manufacturers in the region continue to recover from the damage caused by the COVID-19 pandemic last year.

Minutes of the Federal Reserve’s December meeting due on Wednesday should offer more detail on discussions about making the Fed’s forward policy guidance more explicit and the chance of a further increase in asset buying this year.

The data calendar includes manufacturing surveys across the globe, which will show how industry is coping with the spread of the coronavirus, and the closely watched ISM surveys of U.S. factories and services.