US dollar bills.
Liu Jie | Xinhua via Getty
The dollar fell on Tuesday as investor appetite increased, fueled by continued U.S. Federal Reserve action to combat economic devastation caused by the pandemic as well as potential treatments, which the World Health Organization said appeared to limit the severity of COVID-19 respiratory disease.
Even a small hint of positive news about coronavirus limits the dollar’s appeal as a safe haven currency, though declines were kept under control by growing fears of another wave of infections.
Previously, renewed trade tensions in the US-China supported greenback.
“Everyone is feeling better right now. The risk sentiment commute has fluctuated from negative in Asia to currently positive,” said Erik Bregar, FX strategy manager at the Exchange Bank of Canada in Toronto.
There are several drivers to move the dollar, he noted. “The Fed, which buys ETF corporate bonds today, increases the risk of movement,” Bregar said.
The Fed on Tuesday starts its long-awaited program to buy corporate bonds and the exchange-traded funds that track them.
The risk appetite also improved after the WHO said some treatments appear to limit the severity or length of COVID-19 disease and that it focused on learning more about four or five of the most promising ones. That said, analysts said risk-taking has been constrained by persistent concerns about the current global health crisis.
New coronavirus infections have been found in China, South Korea and Germany, with the respective governments easing the restrictions on closure.
A resumption of coronavirus cases could damage a global economic recovery based on an injection of monetary and fiscal stimulus.
At midday trading, the dollar index fell 0.3% to 99.93.
Greenback was also widely supported by the opportunity of the U.S. President Donald Trump instructs a federal pension fund not to buy Chinese stocks, making investors wary of U.S.-Sino relations.
The White House on Monday appointed three nominees to sit on a board that oversees federal employee pension funds, raising the possibility of reversing a decision to allow one of the funds to invest in Chinese companies under Washington control.
The euro last rose 0.6% against the US currency to $ 1.0865, but still not too far from the $ 1.0636 low touch in late March as the pandemic sent markets in turmoil.
The dollar, meanwhile, fell 0.3% against the yen to 107.30.
The Australian dollar fell earlier, falling to a five-day low of US $ 0.6432 after China banned some Australian meat imports. Later offsets were offset when Australia’s Minister of Commerce played the issue out as a tech and last traded 0.3%.
Traders will look for Fed chairman Jerome Powell’s speech on current economic issues Wednesday, when his views on the future of monetary policy will be carefully reviewed.