Dollar hovers above 2-week low before Fed meeting

The dollar held shy of two-week lows against its rivals on Wednesday, with high-yielding currencies leading gainers as investors bet on central bank easing to remain even as partial lifting of coronavirus lockdowns grew.

Against a basket of its rivals, the greenback edged down 0.2% to 99.73 in late morning London trade, above a two-week low of 99.43 hit in the previous session.

Currency markets were largely in wait-and-watch mode with limited moves before the outcome of a U.S. Federal Reserve meeting later in the day, where policymakers are seen keeping their promise to do whatever it takes to support the world’s largest economy.

Before that, the U.S. quarterly GDP numbers will be released at 1230 GMT, with consensus forecasts for a contraction of around 4%. Analysts are already focusing on the extent of recovery in coming months with a Reuters poll expecting the U.s. economy to expand 3.8% in 2021.

The dollar has weakened more than 3.5% after scaling a more than three-year peak of 102.99 in late March as global central banks launched massive stimulus measures to protect economies from the novel coronavirus pandemic.

“Policy response from the Fed has been very aggressive,” said Lee Hardman, currency analyst at MUFG. He expects the Fed to continue to keep the money taps on to reduce the risk in financial markets.

The unprecedented response by central banks has calmed nerves in forex markets with the Deutsche Bank index of currency volatility sharply retreating from its highs in March.

“Investors are also encouraged by the plans of easing lockdown measures in France and Spain and other European countries and it does look like we will see a pick up in activity towards the end of the second quarter,” Hardman said.

The euro climbed 0.3% to $1.08545 before a European Central Bank meeting on Thursday.

The currency was hardly hit by Fitch’s downgrade of Italy’s sovereign rating to one notch above junk as investors took comfort from some economies in the bloc re-opening.

U.S. stock futures meanwhile rose 0.7% while European bourses were mixed.

“The weakening of the dollar and the strengthening of the commodity-linked currencies suggest that risk appetite may have remained supported for another day,” said Charalambos Pissouros, a senior market analyst at JFD Group.

The Australian dollar led gains against the greenback with the currency up 0.4% at $0.65200.

Australian dollar near six-week peak as easing lockdowns spur risk

The Australian dollar tested six-week highs on Tuesday, as signs of progress in re-opening economies helped the risk-sensitive currency recoup most of the panic selling seen in March, and as the greenback nursed overnight losses.

The Aussie has rallied more than 17% from last month’s 17-year low and overnight rose through resistance around $0.6445. It drifted down to $0.6438 and was just below multi-week peaks against the euro, pound and yen. Other majors were steady.

“The Aussie is in beast mode at the moment,” said Chris Weston, head of research at Melbourne brokerage Pepperstone.

“Part of that is down to the fact that it is your best way of playing reflation…it’s kind of a proxy for equity markets,” he said. Shorts had mostly fled their positions and momentum funds had arrived to ride the wave, Weston said, as traders seemed to worry less about fundamentals and focus more on the valuation outlook.

The move comes amid a global push to re-start economies frozen by coronavirus lockdowns.

In Australia, which has avoided the high number of deaths seen in other countries, states are beginning to relax restrictions on movement. Sydney’s famous Bondi beach re-opened to surfers on Tuesday.

Italy, which has the world’s second-highest number of reported coronavirus deaths, will allow factories and building sites to reopen from May 4 as it prepares to end Europe’s longest lockdown.

The U.S. state of Georgia has begun letting residents dine at restaurants and watch movies at theaters as more states, from Minnesota to Mississippi, took steps to ease restrictions, even though health experts warned it may be too early.

Besides the Aussie, other majors were less exuberant. The New Zealand dollar was subdued, weighed by a particularly aggressive stance from its central bank.

The kiwi retraced overnight gains and fell to $0.5998 while the pound was steady around $1.2424, as Prime Minister Boris Johnson warned it was too dangerous to relax a strict lockdown in Britain.

The Japanese yen has been rangebound just above 107 yen per dollar for half of April, and held at 107.27 on Tuesday.

The slightly softer dollar has also failed to give much lift to the euro, as investors worry about the shape of a rescue package for hardest hit and heavily indebted Spain and Italy.

“Whereas the U.S., UK, Australia, China and Japan, if needs be, can go to the printing presses, in Europe you’re constrained,” said Colin Harte, head of strategy at BNP Paribas Asset Management in London.

“I think there’s a little bit of a risk premium that’s creeping in to the euro on concerns about where do we go from here.”

The single currency held at $1.0832.

US dollar falls as lockdown eases and traders turn less averse to risk

The U.S. dollar fell across the board on Monday as traders turned more positive and less averse to risk amid an easing in coronavirus lockdown restrictions in several countries.

The U.S. dollar was weaker against the Japanese yen and the euro as investors turned slightly more positive on Italy and saw the Bank of Japan continuing to support an economy battered by the virus.

Credit rating agency S&P reaffirmed on Friday Italy’s BBB rating, in spite of what many had expected – a downgrade – supporting the common currency as this limits the escalation of an economic and political crisis on the continent.

The BoJ expanded its stimulus to help companies hit by the coronavirus crisis, pledging to buy unlimited amount of bonds to keep borrowing costs low as the government tries to spend its way out of the deepening economic pain.

The dollar shed 0.3% of its value versus the Japanese yen to trade at 107.23 yen, having fallen earlier to a two-week low of 106.93.

The euro was up 0.2% at $1.0842.

Traders now shift their focus to a U.S. Federal Reserve meeting ending Wednesday and a European Central Bank (ECB) meeting on Thursday as major central banks once again take the stage as the global economy battles against a deep depression.

The Fed has already announced a raft of measures and is expected to stay on hold this week, which is unlikely to trouble the dollar, analysts say.

The stakes are higher for the euro, because the ECB is likely to extend its debt purchases to include junk bonds, and some investors are worried this decision could widen rifts between members of the European Union.

On Sunday, the Australian states of Queensland and Western Australia said they would slightly ease social distancing rules this week as the number of people infected decreased on the continent, pushing the Australian dollar to a seven-week high of 0.6469 against the U.S. dollar.

Encouraged by a fall in infection rates, Germany also has allowed on Sunday small retail stores to reopen, provided they adhere to strict distancing and hygiene rules. Now large corporations are following suit.

Italy will also ease lockdown measures from May 4.

These measures, alongside with more positive COVID-19 data, has turned investors more risky, forcing them to abandon the safety net of greenback, analysts said. A Reuters index which tracks the dollar against other major currencies fell below 100 for the first time since Wednesday.

“The U.S. dollar has started the week on the back foot… It reflects more risk on trading conditions at the start of this week,” said Lee Hardman, currency analyst at MUFG.

“Most notably there was a sharp drop yesterday in the reported number of COVID-19 fatalities in a number of countries including France, Italy, Spain, and the UK which provides further encouragement that lockdown measures are proving effective,” Hardman said.

Dollar snaps four days of gains, but outlook bright

Four days of U.S. dollar gains ended on Friday, although broader concerns about the euro’s outlook kept dollar bears at bay.

The dollar is still set for its biggest weekly rise since early April, after a European Union meeting on Thursday to build a trillion-euro emergency fund disappointed investors.

Despite an agreement by EU leaders to fund a recovery from the coronavirus pandemic, French President Emmanuel Macron said differences continued among EU governments over whether the fund should be transferring grant money, or simply making loans. “They just delivered on the basics and fell short of surprising markets positively and that is weighing on the euro,” said Ilan Solot, a currency markets strategist at Brown Brothers Harriman in London referring to the EU meeting.

The euro initially weakened on Friday, falling 0.4% against the U.S. dollar to a one-month low at $1.07275 and to a three-year low versus the yen at 115.55 yen. It subsequently erased losses and edged into positive territory in late trading though the outlook remained cautious.

The outcome of the EU meeting reflected the disagreement about how to resolve the crisis in Europe and prevent an escalation in peripheral bond yields, said Ulrich Leuchtmann, head of FX strategy at Commerzbank.

With Italy and Spain hit far harder than Germany by the coronavirus pandemic, old disputes have surfaced across the EU, which drop in output of as much as 15%, according to the European Central Bank.

The dollar’s rally this week was aided by a historic collapse in oil prices, which pushed U.S. crude futures into negative territory for the first time ever. As oil prices stabilised, the dollar’s safe-haven appeal receded.

Preliminary goods-orders data in the United States and a German business sentiment survey due later on Friday are unlikely to improve investors’ mood, with any global recovery expected to be slow and patchy.

The Aussie and kiwi each shed about 0.2%, holding the kiwi below 60 cents at $0.5996 and the Aussie at $0.6359, beneath resistance around 64 cents per dollar.

Dollar slips against commodity currencies as Brent surges

The dollar slipped against the currencies of oil-producing states on Thursday, giving up earlier gains as a bounce in crude prices gave succour to markets shaken by the massive coronavirus-induced drop in demand.

As Brent crude surged on signs producers were cutting production to address collapsing demand for fuel, the greenback fell 1% against the Russian rouble to 75.19.

It also dropped 0.5% against the Norwegian crown to 10.7061, pulling back from a one-month high reached a day earlier. Against the Mexican peso it slipped 0.6% to 24.4990, retreating from a two-week high hit earlier.

The gains for oil came as major economies have been brought to a virtual standstill, with severe restrictions on businesses and travel aimed at limiting the spread of the coronavirus hitting commodity currencies.

In volatile trading, Brent crude soared as much as 15%, bouncing back from its lowest level since June 1999. It was last up 6.6% at $21.72 a barrel.

“The price of crude oil has staged a relief rally after coming under intense selling pressures,” said Lee Hardman, currency analyst at MUFG. “It has resulted in the US dollar weakening most notably against oil-related currencies.”

The euro slipped against the dollar after French business activity hit a record low, with the single currency losing 0.3% to fall below $1.08 for the first time in 2-1/2 weeks. It was last at 1.0785.

Investors also awaited euro zone PMI data, due at 0800 GMT.

The French data rattled the euro ahead of a meeting of European Union officials on the bloc’s response to the economic turmoil caused by the global coronavirus pandemic.

Markets are wary given uncertainty over how far EU governments will cooperate in financing the recovery from what is sure to be a deep recession.

Ahead of the outcome of the meeting, the euro was down 0.2% against the pound at 87.60 pence.

The European Central Bank has agreed to accept junk bonds as collateral to allow banks to finance themselves at the ECB, which should be a positive factor for the euro, but investors are waiting for details on the fiscal response.

The dollar was flat against a basket of currencies, lasting trading at 100.540.

Dollar surges across board, oil-linked currencies fall

The U.S. dollar rose on Tuesday against most major currencies as investors sought a safe haven after a plunge in oil prices a day earlier.

U.S. crude oil futures plunged into negative territory for the first time on Monday, dragged by a supply glut and sagging demand due to the novel coronavirus pandemic though they managed to scrape back into positive territory early Tuesday.

Oil-linked currencies like the Norwegian crown and the Canadian dollar were the worst performing currencies on Tuesday, along with the Swedish crown, a currency very sensitive to global economic stability.

The Norwegian crown was down 0.7% at 10.51 against the dollar and the Canadian dollar fell 0.4% to 1.4211 against the greenback, a two-week low.

The Swedish crown was down 0.5% at 10.07.

The euro was last down 0.3% at $1.0833.

“The euro is suffering as markets contemplate the increased borrowing that will be necessary to fund the recovery” from COVID-19, said Marshall Gittler, analyst at broker BDSwiss. European countries have been issuing debt to support their economies which have been frozen by the lockdowns.

Against the ultimate safe-haven currency – the Japanese yen – the dollar was last trading down 0.2% at 107.40.

U.S. West Texas Intermediate crude for May delivery was trading last -$2.51 per barrel, off a low of minus $40 hit in New York trading.

The May contract expires on Tuesday. The more actively traded June contract was down at $20.27 a barrel.

“Oil is off its lows, but a lot of companies are going to get hit and companies could start to fail,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors in Sydney.

“If share prices have a pullback, the dollar could see some gains as a safe haven. The only thing that’s capping the dollar is that the Federal Reserve has done more quantitative easing than anyone else.”

Factory closures and travel curbs enforced to slow the pace of new infections have triggered a collapse in oil prices. This is drawing money from commodity currencies and other risk assets to the safety of dollar-denominated assets.

At 0900 GMT, analysts will be watching for the German ZEW economic sentiment survey. Economists polled by Reuters expect the economic sentiment and current conditions in

Dollar firm as caution on economic re-start returns

The dollar found support on Monday and a rally in riskier currencies lost steam, as investors braced for more dire news on the fallout from the coronavirus and governments across the globe moved only cautiously toward an economic re-start.

Major currencies were mostly rangebound, though the risk-sensitive Australian and New Zealand dollars and the oil-sensitive Canadian dollar led losses with falls of around 0.3%.

Oil, U.S. stock futures and Asian equities were also softer as caution took hold after two weeks of looking on the bright side.

“Hurdles facing optimists are very substantial,” said Sean Callow, Westpac FX analyst in Sydney.

“We’re three weeks into a quarter that globally looks as though it’s going to be the worst in many decade. For us, while the momentum may be with risk appetite for a little bit longer, we think its very fragile and has to pull back very soon.”

The Australian dollar sat a cent lower than a one-month high hit last week at $0.6344. The New Zealand dollar was also on the back foot, but held at $0.6013 after stronger-than-expected first-quarter inflation.

Investors’ preference for the dollar as a safe harbor also pushed euro, pound and yen a little lower. The euro was about 0.2% softer at $1.0858 and the pound retreated to $1.2477. The dollar rose 0.2% to 107.77 Japanese yen.

The week ahead brings U.S. monthly employment figures, eurozone survey indicators and quarterly growth in world-trade bellwether South Korea. None are likely to be easy reading.

The week is also crucial to the COVID-19 recovery as governments around the world make tentative steps toward easing lockdowns.

In the United States, where the death toll rose to more than 40,000 on Sunday, state governors have sparred with President Donald Trump over virus testing capacity and how quickly their economies can re-open.

Investors are also closely watching an announcement due in New Zealand at 0400 GMT as to whether its tough but curve-squashing restrictions are to be loosened or extended.

Britain is not considering lifting its lockdown, a senior minister said on Sunday, while leaders in Ireland and Canada have flagged long-lasting social distancing rules.

“We are coming into the eye of the storm,” said Chris Weston, head of research at brokerage Pepperstone in Melbourne.

“And as the market starts to focus less on virus headlines, or at least will be less sensitive to better news, we will focus more on the lasting effects on the economy and solvency.”

China, which has suffered its first quarterly growth contraction since quarterly records began, is expected to cut its benchmark lending rate later on Monday.

The yuan was steady at 7.0711 per dollar in offshore trade.

Dollar steadies as overnight sentiment boost eases off

The dollar steadied in early London trading on Friday after its rally was cut short by an overnight boost to risk sentiment from news of apparent success in a Covid-19 treatment drug trial and early plans to reopen the U.S. economy.

The dollar, which has closely tracked risk sentiment through the coronavirus crisis, was broadly flat against a basket of currencies, up less than 0.1%.

But there were signs of increased risk appetite as the safe-haven Japanese yen was down 0.2% while the riskier New Zealand dollar rose 0.7% and the Australian dollar gained 0.4%.

The euro was broadly flat against the dollar, at $1.084.

Sentiment was boosted overnight by a media report detailing encouraging partial data from experimental drug trials on severe COVID-19 patients at the University of Chicago. More data is expected at the end of the month.

News of U.S. President Donald Trump’s plans to reopen the world’s largest economy was taken by investors as a positive sign, even after Thursday’s jobless data showed a record 22 million Americans sought unemployment benefits in the last month.

The overnight moves toppled the dollar, which has closely tracked risk sentiment through the coronavirus crisis, from a week high.

Though the greenback is headed for its smallest weekly rise in almost two months, the dollar is likely to be supported in the short term as any vaccine will take months to come to market while the economic costs from months-long lockdowns in the global economy is going to be huge.

“Although there are some signs of recovery this morning, I still have my doubts that this will prove sustainable,” said Commerzbank FX analyst Thu Lan Nguyen, citing poor economic data and market concerns about whether new infections are lessening sufficiently to justify relaxing lockdown measures.

China’s economy shrank 6.8% in the first quarter, the first reversal since at least 1992, as the coronavirus outbreak paralysed production and spending.

Investors were slightly optimistic because the data was not much worse than they had feared, and because of a less-than-expected 1.1% drop in industrial output, though big uncertainties remain.

Dollar gains as global economy braces for further virus fallout

The dollar rebounded on Wednesday amid growing concerns that the damage to the global economy from the coronavirus pandemic will be long and protracted, boosting the safe-haven appeal of the greenback.

A fall in oil prices on expectations that production cuts by OPEC may not be enough to support crude during a global demand crunch also weakened riskier currencies, with the oil-exposed Norwegian crown and Canadian dollar down sharply.

The U.S. dollar had weakened in the previous four consecutive sessions on cautious optimism that lockdowns were slowing the spread of the virus.

But analysts warn that it remains unclear whether economies will recover quickly or whether it might take longer than expected.

Fresh economic data from the U.S. later on Wednesday is expected to show a steep fall in retail sales, as well as hits to manufacturing and industrial production. This will be the first sets of economic data outside the U.S. jobless claims.

“Investors are taking stock and bracing for some big U.S. numbers. These are the numbers you want to see to get a sense of how bad things are going to be,” said Kenneth Broux, FX strategist at Societe Generale.

“Oil prices going down is also not good for sentiment. It’s broken the expectation that OPEC’s action would stabilise prices.”

In morning trading on Wednesday, the dollar bounced off early lows hit in Asian trading and rose 0.5% at 99.40 against a basket of rivals, potentially breaking the four-day losing streak.

The greenback gained across the board, particularly against currencies seen as riskier bets such as sterling, where it was almost 1% higher.

The dollar rose around 0.5% versus the euro and Swiss franc, and inched up 0.2% against the Japanese yen.

Antje Praefcke, FX and EM analyst at Commerzbank, said investors were preparing for a slew of negative economic data.

“That means the worst might yet be to come, facing the market with an ice bucket challenge. In that case risk aversion would rise, allowing the dollar to appreciate again.”

Oil price concerns sent the Norwegian crown tumbling almost 2% against the U.S. dollar, while the Canadian dollar was down nearly 1% versus the greenback.

The Bank of Canada is due to announce later on Wednesday whether it plans to take further action to limit the economic fallout from the coronavirus pandemic.

But having already slashed rates to 0.25% and ramped up asset purchase programmes, analysts said the central bank had little wriggle room.

“I don’t see any further cuts in store unless things get really, really bad – and the fact is, we’re redefining ‘really, really bad’ every day,” said analysts at MUFG in a note.

Dollar slips as Chinese data improves

The dollar fell Tuesday, much to the enjoyment of sterling and Australian dollar holders, after better-than-expected economic data from China which painted a less gloomy picture of the new coronavirus’ economic fallout than markets had feared.

China’s March exports fell 6.6% from a year earlier, compared with a forecast for a 14% drop and imports fell by less than 1%, compared with a 9.5% drop anticipated by economists.

Daily fatalities in the United States also fell sharply and states began plans to re-open their economies, leaving traders to abandon the safety net of the most liquid currency – the dollar – and turn to more risky currencies.

The Australian dollar rose to a more than one-month high of 0.6432 per U.S. dollar and was last up 0.5%.

Sterling went up by the same magnitute, touching $1.2575, its highest since March 13, up 0.5% on the day. The pound had been closely linked to the performance of the equity market for the past weeks.

The euro inched higher by 0.2% to $1.0932.

The only currency the dollar was down against in the major economies was the Japanese yen, which rose 0.1% versus the greenback to 107.69 yen.

“The ongoing improvement in global investor risk sentiment in the near-term combined with the Fed’s aggressive policy response is beginning to weigh down more on the U.S. dollar,” said Lee Hardman, currency analyst at MUFG.

The mood in the forex markets was preempted by leveraged funds last week, whose net short U.S. dollar positioning in the latest week touched their largest level since May 2018, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

The value of the net short dollar position was $10.5 billion in the week ended on April 7, from net shorts of $9.9 billion the previous week. Speculators have been short on the U.S. dollar for four consecutive weeks.