Dollar stymied as mood swings between recovery hopes and virus fears
The dollar struggled to make headway on Monday, and riskier currencies inched ahead, as investor sentiment swung between hopes for a global economic recovery and fears that a fresh wave of coronavirus cases could undermine the revival.
Against a basket of currencies the greenback retreated from a one-week high hit on Friday and dipped 0.2% to 97.303. The trade-exposed Australian and New Zealand dollars rose about 0.2% to near the middle of recent ranges.
California ordered some bars to close on Sunday, following similar moves in Texas and Florida, as cases nationwide soar to record levels. Washington state and the city of San Francisco have paused re-opening plans.
Yet elsewhere – from New York to Europe and Asia – re-openings continue apace and data illustrates a swift rebound.
“The debate is still very live,” said Westpac FX analyst Sean Callow. “How seriously are you going to bet that retreats in reopening in selected U.S. states are enough to actually puncture the rally?”
For now the dollar has dithered rather than deflated.
The Aussie and kiwi are headed for monthly gains around 3% but made most of that ground in the early days of June and have tracked sideways since then. [AUD/]
The Aussie, which has gained nearly 25% from a more than 17-year low hit in March, was last up 0.2% at $0.6877. The kiwi rose by the same margin to $0.6431.
Simultaneous safe-haven gains also point to heightened caution, even as the thirst for dollars has eased off as the U.S. Federal Reserve has flooded markets with liquidity.
The yen and Swiss franc seem set for their best months against the greenback this year, with gains of 0.6% and 1.5% respectively. Each made a small rise on Monday.
Elsewhere, sterling bounced 0.3% from a month-low plumbed on Friday as investors fretted about whether Britain can settle a post-Brexit trade pact with the European Union. A fresh round of talks is due to begin this week.
Globally half a million people have died from COVID-19, about a quarter them in the United States.
The jump in U.S. cases has been most pronounced in a handful of Southern and Western states that reopened earlier and more aggressively and investors are closely watching to see the extent and severity of renewed restrictions.
Elsewhere, rollbacks of lockdowns seem to be trouble free and outbreaks in other global hotspots, from Germany to Melbourne and Beijing appear localised, for now.
And economic data continues to surprise on the upside.
Profits at China’s industrial firms rose for the first time in six months in May, China’s national bureau of statistics said on Sunday, suggesting the recovery is gaining traction.
Investors are looking to eurozone confidence data due at 0900 GMT and German inflation figures at 1200 GMT for the latest gauge of the region’s economic health.
It is also an important week for U.S. data with the ISM manufacturing report on Wednesday and payrolls on Thursday, ahead of the Independence Day holiday. Federal Reserve Chair Jerome Powell is also testifying on Tuesday.
The euro is set to wrap up its best two months against the dollar in a year and a half, as hopes for a united EU response to the virus and a swift regional recovery propel the single currency ahead about 2.5% since the beginning of May.
The single currency rose 0.2% to $1.1239 in Asia on Monday.
“Given the euro area’s high (sensitivity) to global trade, we expect more global uncertainty around the pandemic to keep any upside capped,” ANZ bank analysts said in a note.