NEW YORK (Reuters) - The U.S. dollar recovered after falling to its lowest level since April 2018 on Monday, as surging coronavirus cases undermined bullish sentiment that had begun the new year across global markets and pushed investors into riskier currencies, such as the Chinese yuan and the euro. With U.S. interest rates pinned at record lows, massive U.S. deficits and a belief that rebounding world trade will drive non-dollar currencies higher, the dollar initially weakened on the first day of trading in 2021 after falling nearly 7% in 2020. But the losses for the dollar reversed as risk-appetite soured shortly after the opening of trading for U.S. equity markets, with major indexes down more than 1% on concerns over the rollout of coronavirus vaccines and the outcome over the runoff elections in Georgia that will determine control of the Senate. The dollar index rose 0.159%, after touching a low of 89.415, a level last seen on April 17, 2018. “There are still a lot of obstacles in front of the market right now, the market optimism can only outrun the near-term risks for so long,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington DC. “That is what helps to slow the dollar’s decline.” The Chinese currency was the biggest beneficiary of the weak dollar trade as the yuan rocketed to a two-and-a-half-year high. The Chinese yuan strengthened to 6.44 yuan per dollar after Beijing cut the weighting of the U.S. dollar in a key currency index basket. That could push the yuan’s value higher against its peers this year, analysts said, while Chinese factory activity continued to accelerate in December. After a dip on New Year’s Eve profit-taking, the euro was up 0.9% to $1.2246, after hitting a high of 1.231, its highest level since April 2018 as positive economic indicators helped the currency strengthen. Also, a closely-watched gauge of growth in British manufacturing activity rose to its highest level in three years as factories rushed to complete work before the end of the post-Brexit transition period on Dec. 31. Sterling, however, relinquished its early gains against the dollar, retreating below $1.37 as tighter lockdown measures were set to be introduced. Sterling was last trading at $1.3557, down 0.83% on the day. The safe-haven Japanese yen strengthened 0.05% versus the greenback at 103.17 per dollar, after Japanese Prime Minister Yoshihide Suga said his government was mulling a state of emergency in Tokyo as coronavirus cases rise. Bitcoin tumbled, falling as low as $27,734 at one point, after gains over the new year’s break that saw the world’s most popular cryptocurrency rise to a record $34,800. It was last down 5.09% at $31,411.95.