Dollar Down After Investors Boosted by COVID-19 Vaccine Hopes

The dollar was down on Tuesday morning in Asia, with investor risk appetite increased by ever more countries cautiously loosening lockdowns to curb the COVID-19 virus and increased hopes of economic recovery from the virus’s impact.

U.S. biotechnology company Novavax (NASDAQ:NVAX) targets clinical trial results for its novel COVID-19 vaccine by July, and will start phase 2 trials in several countries, including the U.S., based on the phase 1 results.

But the dollar capped its gains with investors continuing to monitor the U.S.-China relationship. Tensions between the two countries flared up last week after China tabled national security laws for Hong Kong and Macau.

"Markets are caught between two conflicting currents," Michael McCarthy, CMC Markets' chief strategist, told Reuters.

"Rising tensions between China and the U.S. are raising concerns, while easing COVID-19 lockdown measures are fueling growth optimism."

The U.S. Dollar Index that tracks the greenback against a basket of other currencies was down 0.20% to 99.692 by 11:27 AM ET (11:27 AM GMT) after investors retreated from the safe-haven asset.

Meanwhile, the USD/CNY pair lost 0.05% to 7.1325.

The USD/JPY pair gained 0.12% to 107.81. Japan lifted the state of emergency for the last five prefectures, including capital city Tokyo, on Monday.

The AUD/USD pair gained 0.36% to 0.6564 and the NZD/USD rose 0.41% to 0.6124.

Although ANZ upgraded its forecasts for the AUD and NZD, it still expects both to fall throughout the year. "At current levels a global recovery is in the price, and we believe it's a question of when, not if, depreciation resumes," the bank’s analysts said in a note.

The GBP/USD pair gained 0.23% to 1.2210 even after Dominic Cummings, advisor to U.K. Prime Minister Boris Johnson, refused to step down after breaching lockdown rules during Monday’s press conference.