By Peter Nurse
Investing.com - The dollar edged higher in early European trade Thursday, with traders shying away from riskier currencies as they readjusted their expectations surrounding a potential Covid-19 vaccine.
At 3:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 93.073, USD/JPY fell 0.1% to 105.28, while the risk sensitive AUD/USD fell 0.2% to 0.7262.
Pfizer’s announcement of positive results for the vaccine candidate that it is co-developing with BioNTech earlier in the week saw the dollar fall to a 10-week low that was more than 10% off its March peak. However, the enthusiasm has since waned and the dollar has rebounded by almost 1%, as traders readjusted their positions.
EUR/USD dropped 0.1% to 1.1770, continuing to fall after dropping around 0.4% late Wednesday after European Central Bank President Christine Lagarde warned that Europe could still see an acceleration of virus transmission and tighter restrictions, hinting at further easing in the near future.
“While all options are on the table, the pandemic emergency purchase program and targeted longer-term refinancing operations have proven their effectiveness," ECB governor Christine Lagarde said at the ECB forum on central banking in Frankfurt on Wednesday. "They are therefore likely to remain the main tools for adjusting our monetary policy."
Her comments were taken as suggesting that the ECB won't cut its deposit rate any further.
Elsewhere, GBP/USD traded 0.3% lower at $1.3186, after the release of the latest U.K. growth data. This showed Britain's economy grew by a slower than expected 1.1% in September from August, even before the latest restrictions on businesses.
In the July-September period, gross domestic product grew by a record 15.5% compared with the previous three months, a strong rebound but still not enough to make up for the 19.8% crash in the second quarter when the country was in the grip of its first coronavirus lockdown.
“We expect a 6-7% decline in UK GDP through November, rendering the unprecedented bounce-back we saw in the third quarter 'old news',” said ING analysts, in a research note.
Additionally, USD/TRY rose 1.2% to 7.8923, with the lira handing back some of Wednesday’s near 5% gain against the dollar.
President Recep Tayyip Erdogan on Wednesday committed to contain inflation while putting Turkey on a sustainable growth path, and comes after he removed the central bank chief and his son-in-law as economy czar in recent days.