The greenback is stabilizing however issues in regards to the coronavirus and the Biden transition loom

© Reuters. FILE PHOTO: One US dollar banknote

By Stanley White

TOKYO (Reuters) – The dollar stabilized against most currencies on Tuesday as coronavirus restrictions returned in some U.S. states and concerns about a smooth transition for President-elect Joe Biden offset optimism about a coronavirus vaccine.

The British pound rose in media reports that the UK could reach a post-Brexit trade deal with the European Union early next week.

Moderna (O 🙂 was the second US drug company in a week to report positive results from trials with a COVID-19 vaccine that was deemed necessary to eradicate the pandemic.

Last week, encouraging advances in coronavirus vaccine tests helped the dollar strengthen against the Safe Harbor yen and the Swiss franc.

However, the reaction in the forex market to later developments has been muted as the United States is struggling to contain a second wave of infections and the vaccine distribution is not expected anytime soon.

There is also some uncertainty about Biden's plans to fight the coronavirus and boost the economy as the Trump administration opposes working with Biden's transition team.

"Market reaction has been limited as the vaccine will take time to distribute and there is uncertainty about US policy," said Masafumi Yamamoto, chief foreign exchange strategist at Mizuho Securities in Tokyo.

"If we don't overcome this hurdle, the dollar will not rise. The dollar looks particularly weak against the yuan."

The dollar traded at $ 1.1858 per euro () on its way to its fourth straight session of declines.

The pound sterling rose to $ 1.3221 and also rose to 89.71 pence per euro ().

The greenback remained stable at 104.52 yen

Dollar investors await Tuesday's US retail sales and industrial production release to gauge the health of the economic recovery.

However, the response of policymakers to a record number of coronavirus cases, hospitalizations and deaths in several US states is likely to remain more worrying.

The () against a basket of major currencies was 92.503, close to a weekly low.

New infections are also increasing in the UK, Europe and Japan, which further clouded the economic outlook.

The Australian dollar held on to overnight gains against the greenback while the New Zealand dollar hit its strongest level in more than a year as investors reduced their bets for additional rate cuts.

Minutes of the Reserve Bank of Australia's recent political meeting showed that the central bank stood ready to provide further policy stimulus if needed after rates were cut to hit lows.

The rise to 6.5678 a dollar was nearing a 28-month high hit last week as positive economic data continued to support the currency.

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