Coronavirus Vaccine Could Lead to USD Depreciation

Large-scale distribution of Coronavirus vaccines, coupled with the current monetary easing policy by the United States Federal Reserve could lead the US Dollar (USD) to weaken by as much as 20% in 2021, according to a recent report by Citibank, Reuters reported.

“When viable, widely distributed vaccines hit the market, we believe that this will catalyze the next leg lower in the structural USD downtrend we expect.”

“Given this set-up, there is the potential for the dollar’s losses to be front-loaded, with the USD potentially falling by as much as 20% in 2021.”

It is expected that the projection are also based on expectations that the Fed is set to maintain its current monetary policy, even if inflation expectations rise with economic recovery.

This will in turn lead U.S. treasury yield curve to steepen, according to market analysts.

“This is important for FX as when investors begin to rotate into value, they will increasingly rotate out of the United States given valuations on both the SPX and USD are rich versus the rest of the world.”

Pfizer Inc said on Wednesday that the final efficacy analysis of phase 3 trial of the coronavirus vaccine it develops with BioNTech has shown to be 95% effective.

“Efficacy of COVID-19 vaccine was consistent across age, race and ethnicity demographics.”

“Planning to file for US emergency use authorization of COVID-19 vaccine within days.”

“Concluded phase 3 study with 170 confirmed cases of covid; 162 of those cases were in the placebo arm.”

Meanwhile, Moderna said its initial, third-beta data show its coronavirus vaccine is more than 94% effective in preventing COVID-19 – a result that CEO Stéphane Bancel has called it a “game-changer”.

Moderna, which developed its vaccine in cooperation with the National Institute of Allergy and Infectious Diseases, said that 90 cases of COVID-19 were observed in the placebo group versus five cases in the group that received a two-dose vaccine. She added that this led to a vaccine effectiveness estimated at 94.5%.

Moderna added that it expected the vaccine could be shipped and stored for up to six months at minus 20C, and then remain stable once thawed for 30 days if refrigerated at between 2C and 8C. In contrast, BioNTech-Pfizer have said their shot must be transported at minus 75C and can survive in a normal fridge for only five days, making it potentially more complicated to distribute.