By Peter Nurse
Investing.com – The dollar has been on the back foot Tuesday, with risk sentiment boosted by further evidence that the virus has peaked in some countries in Europe, while the U.S. has also seen scattered evidence of improvement.
At 3:10 AM ET (0710 GMT), the U.S. Dollar Index, which tracks the greenback against a basket of six other currencies, stood at 100.235, down 0.5%, with the loonie, Aussie and kiwi all rising over 1%. USD/JPY fell 0.3% to 108.88, while EUR/USD rose 0.6% to 1.0859. GBP/USD gained 0.7% to 1.2316 even as Prime Minister Boris Johnson was moved into intensive care overnight due to his worsening COVID-19 symptoms.
Spain’s daily death toll fell on Monday for the fourth day running to 637, its lowest level since March 24, while Italy reported 525 deaths on Sunday, the fewest since March 19 (although deaths ticked up again on Monday). In New York, the epicenter of the outbreak in the U.S., Governor Andrew Cuomo said Monday that the state’s death rate has been ‘effectively flat for the last two days.’
The euro will be in focus later as eurozone finance ministers hold a teleconference call to discuss strategies for funding the region’s policy response to the virus. Various ideas and schemes are competing for attention, but the desire of Spain and Italy for jointly-issued and guaranteed ‘coronabonds’ is likely to be rejected by Germany, the Netherlands and others.
The price of oil has become another factor impacting the strength of the dollar.
“USD and oil have become an increasingly uneven relationship with US oil production now a key liability for USD,” said Danske Bank, in a research note.
Looking at Thursday’s meeting of the major crude producers to discuss a reduction of supply, “we think risks are tilted towards a disappointment and expect Brent oil to stay sub-USD40/bbl. This could fuel USD/JPY moving towards 106 again near term,” Danske added.
By extension, “we generally also find it too early for commodity currencies to see a forceful recovery, even if NOK remains an exception due to notably its fiscal support,” Danske added.
At 3:10 AM ET, USD/NOK dropped 1.4% to 10.2866, while the price of Brent rose 3.1% to $34.09 a barrel.
The dollar also gave up ground against most emerging market currencies, with the Chinese yuan rising around half a percent.
Forex – Dollar Weakens as Risk Sentiment Improves
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