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Dollar slips, yen regains lost ground after vaccine progress news

November 11, 2020 00:00:00

LONDON, Nov 10 (Reuters): The dollar edged down slightly on Tuesday and the Japanese yen recovered some of the previous session's losses after news of progress towards a COVID-19 vaccine boosted risk appetite in global markets.

US drugmaker Pfizer Inc and German partner BioNTech said on Monday a large-scale clinical trial showed their vaccine was more than 90 per cent effective in preventing COVID-19.

The dollar -- which is considered to be a safe haven and so typically falls on positive news -- rose after the announcement, as investors quit their long positions in safe currencies such as the Japanese yen and Swiss franc. The safe-haven Japanese yen tumbled to a 20-day low versus the dollar.

But these moves eased on Tuesday, with the yen and franc clawing back some of their losses JPY=EBSCHF=EBS, as market participants tempered their initial pro-risk reaction, in light of uncertainty about how or when a vaccine could be rolled out.

"Following a euphoric market reaction such as that the question that now arises is whether it was justified or possibly exaggerated," wrote Commerzbank FX and EM analyst You-Na Park-Heger in a note to clients.

"Even if the news of a vaccine could be a game changer, we urge caution, as the massive euphoria could be followed by some disenchantment," she said.

But Lee Hardman, currency analyst at MUFG, said that despite the uncertainties "it is still an important step forward to exit the COVID crisis and provides a reminder not to bet against human ingenuity".

"It supports our baseline assumption behind our FX Outlook that effective vaccines will be implemented next year," he added. "Further positive progress on vaccines will allow currencies which have been hit hard by the COVID crisis to continue to rebound."

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