(C) Reuters. Illustration photo of a U.S. Dollar note
By Stanley White
TOKYO (Reuters) – The dollar held steady against most currencies on Monday as investors awaited data expected to show the U.S. services sector stopped contracting, which would further lift hopea for an economic recovery from the coronavirus pandemic.
The euro moved in a narrow range before economic data from Germany and the eurozone that are also forecast to show a sharp rebound in corporate activity and retail sales, which would ease concerns about the economic outlook.
The yen fell against most major currencies as gains in Asian share prices encouraged some risk-on trades.
A steady rise of new coronavirus infections in the United States has discouraged some investors from taking big positions in the currency market, but most market participants remain focused on the growing likelihood that major economies will continue to recover.
“When it comes to dollar/yen, recovery expectations are supporting the dollar, but worries about the virus are capping the upside,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
“The markets are focused on other currency pairs, like the Australian dollar, which is still in a clear uptrend against the U.S. dollar due to the rise in copper prices.”
The dollar edged up to 107.68 yen on Monday following a 0.3% gain last week. Market activity was subdued after the July 4 long weekend holiday in the United States.
Sterling moved in a narrow range at $1.2494.
Against the Swiss franc, the dollar dipped to 0.9432.
The Institute for Supply Management’s index for non-manufacturing activity due later on Monday is expected to rise to 50.0 in June from 45.4 in the previous month, indicating activity stopped shrinking.
The greenback has been locked in narrow trading ranges recently as concerns about a resurgence in U.S. coronavirus infections offset growing optimism about the economy.
The euro will come into focus later in the trading day as Germany, the euro zone’s largest economy, is scheduled to release industrial orders for May.
Retail sales for all of the eurozone will also be released later on Monday. Both indicators are forecast to recover strongly from large declines caused by the spread of the coronavirus.
However, the yen could quickly reverse course given the uncertainty surrounding the coronavirus, analysts said.
The onshore yuan rose to 7.0490 per dollar on Monday, the highest since April 30. The yuan drew strength from a jump in Chinese share prices to the highest in five years as investors shrugged off concerns about diplomatic tension between the United States and China.
The Australian dollar rose 0.3% to $0.6962 on Monday following a 1.2% gain last week, with the market focused on a Reserve Bank of Australia (RBA) policy meeting on Tuesday.
Analysts expect the policy rate to stay at 0.25% amid signs Australia’s economic downturn will not be as dire as first feared.
Recent gains in prices of copper and other commodities that Australia exports, combined with a more positive tone for the RBA, are likely to support the Aussie, analysts say.
However, there are still reasons to be cautious about the Aussie. On Monday, Australia’s Victoria state said it will close its border with the country’s most populous state of New South Wales to contain a sudden spike in coronavirus infections.
Across the Tasman Sea, the New Zealand dollar was quoted at $0.6550.
Graphic: World FX rates in 2020 https://graphics.reuters.com/GLOBAL-CURRENCIES-PERFORMANCE/0100301V041/index.html
Dollar steady ahead of services sector data, rising stocks sink yen