Dollar drops as recovery optimism boosts risk sentiment

The dollar dropped to a three-week low on Tuesday, while the pound reached a near three-year high as progress in vaccine rollouts improved investor’s hopes for economic recovery.

Commodity currencies also rose on Tuesday, while the safe-haven yen was dragged by the upbeat market mood and a selloff in U.S. Treasuries. 

The Japanese yen fell through its 200-day moving average against the greenback. It was down 0.2% to 105.53 on the dollar. 

The Chinese yuan stood near three-year highs on Tuesday, just below the 6.4-level, which it last hit in mid-2018. The risk-sensitive Aussie rose to a one-month high of $0.7802 and the kiwi hit a five-week peak of $0.7257.

The dollar index slid 0.1% to 90.240, its lowest since Jan. 27. The euro gained 0.2% to $1.2150, just below its recent resistance level. 

The pound extended gains to stand at $1.3946 as Britain leads the world in per-capita vaccination speed. 

Ahead on Tuesday, traders await estimates for the euro zone growth, U.S. manufacturing data, and a German sentiment survey to assess the pace of global pandemic recovery.