The dollar fluctuated on Monday as investor optimism about reopening economies around the world lifted commodity prices and exporters’ currencies, while talk of negative interest rates kept the pound near a nearly two-month low. Oil futures rose 3%, pushing the Canadian dollar a touch higher. Dalian iron ore futures hit a record high, helping to lift the Australian dollar from a week low.
As the coronavirus outbreak centers from New York to Italy gradually lifted the restrictions, the improved sentiment also supported other Asian currencies. But tensions between the US and China tempered the general sentiment and kept a lid on wider gains. The New Zealand dollar rose 0.4%, though at $ 0.5956 it couldn’t break past 60 cents. The Aussie went up half a percent, but still remained below 65 cents at $ 0.6455.
The Chinese yuan, a barometer from Sino-U.S. tensions, hardly moving from a week-low hit last week – highlighting the caution that supports traders’ views. “There are three obstacles to cross: the shape of the recovery … U.S.-China tensions and concerns about unconventional monetary policy,” said Bank of Singapore FX analyst Moh Siong Sim.
“I think the dollar is settling down in a broad trade area, waiting to see how all these macro uncertainties play out.” Against the yen, the U.S. currency sat more or less in the middle of a range it has held since April at 107.10 per share. dollar. It was marginally softer against a basket of currencies.
The pound lowered to a seven-week low of 89.58 pence per pound. Euro and was under pressure of $ 1,2107 following a week-long stalemate over a post-Brexit trade agreement with the European Union and increasing focus on the possibility of negative rates. Bank of England chief economist Andy Haldane did not rule out such a move in an interview with the Telegraph newspaper published on Saturday.
REMAINING DEFENSE The depth of the economic damage already done by the coronavirus pandemic is also becoming clearer, as rising trade tensions obscure the outlook.
Japan has gone into recession for the first time since 2015, and makers support the country’s worst postwar decline in the current quarter. Thailand’s economy contracted at its sharpest pace for eight years. Purchasing executives’ index surveys across major economies later this week provides the next insight into the outlook.
Markets are also on edge for a Chinese response to the Trump administration’s move to block chip supplies for Huawei after China’s Global Times newspaper flagged possible retaliation. “We remain defensive,” Bank of America’s currency analysts said in a Friday note released Monday.
“This week we’re going to brief Aussie / yen,” they wrote. “Beyond our more bearish global outlook than consensus, we are increasingly concerned about US-China trade risks, as China will not be able to meet ‘phase 1’ trade commitments and face criticism over the way it has handled COVID-19. ”