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The U.S. dollar dipped on Tuesday after The World Health Organization said some treatments appear to be limiting the severity or length of the COVID-19 respiratory disease.

Even a small hint of positive coronavirus news limits the dollar’s appeal as a safe-haven currency as investors eye riskier assets, though declines were kept in check by growing fears of a second wave of coronavirus infections.

The U.S. currency was also supported by the Federal Reserve playing down the likelihood of negative U.S. interest rates, boosting the the dollar’s yield attraction.

Fed policymakers say they will do what it takes to cushion an economy crushed by widespread lockdowns aimed at slowing the spread of the coronavirus but are likely to stop short of negative interest rates.

New coronavirus infections have been found in China, South Korea and Germany, where respective governments have eased lockdown restrictions.

A re-emergence of coronavirus cases could dent a global economic recovery on the back of an injection of monetary and fiscal stimulus.

German economic output is likely to have declined by 20-25% for several weeks during the coronavirus outbreak, the KfW state development bank said on Tuesday.

“While the number of cases was relatively small, they do play into market fears over the threat posed by a second wave of COVID-19 infections and highlight the challenging path ahead for the global economy,” said MUFG currency analyst Lee Hardman.

The euro was last up 0.2% against the U.S. currency at $1.0830, though still not too far from the $1.0636 low touched at the end of March when the pandemic sent markets into turmoil.

The Japanese yen rose 0.2% to 107.44 against the dollar .

The Australian dollar was the biggest mover in Asian trading, dipping to a five-day low of 0.6432 after China banned some Australian meat imports. It later pared losses as Australia’s trade minister played down the issue as a technicality and was last trading up 0.3%.

Nordic currencies rose, however, with the Norwegian crown last up 0.8% at 10.2270.

Richard Falkenhall, senior FX strategist at SEB, said investors were anticipating Norges Bank buying more crowns going forward as the country looks to widen its fiscal deficit, supporting it with capital from the government’s oil fund.

Norway will sharply raise spending by its trillion-dollar sovereign wealth fund this year, the government said on Tuesday, exceeding a self-imposed cap for the first time in more than a decade to aid an economy reeling from the coronavirus crisis.

As the fund is denominated in foreign currency, this would lead to more crown buying, Falkenhall said, adding that SEB expects the central bank to increase purchases to 2.2 billion crowns a day from the current 2.1 billion crowns.

The Swedish crown followed suit, rising 0.7% to 9.8025.

The greenback was broadly supported by the possibility of U.S. President Donald Trump instructing a federal pension fund not to buy Chinese equities, making investors cautious on U.S.-Sino relations.

The White House on Monday named three nominees to sit on a board that oversees federal employee pension funds, raising the potential for the reversal of a decision to allow one of the funds to invest in Chinese companies under scrutiny from Washington.

Trump also said he opposed a reopening of so-called Phase 1 trade negotiations after China’s state-run Global Times floated the idea on Monday.

Traders will be looking for Fed Chairman Jerome Powell’s speech on current economic issues on Wednesday, when his views on the future of the monetary policy will be scrutinised closely.

The dollar rose on Monday as investors worried that economic recovery might be slower than hoped and sought the safety of the U.S. currency even though more countries eased coronavirus lockdowns.

The dollar was broadly flat overnight but rose in early London trading as investors adjusted their risk expectations with an eye on warnings of a second wave of COVID-19 infections.

Japan said on Monday it could end its state of emergency in many regions this week and New Zealand said it could ease restrictions on Thursday. The UK has also set out plans to ease the lockdown while in France shops re-opened on Monday.

South Korea warned of a second wave of the virus as infections rebounded to a one-month high and new infections have also accelerated in Germany.

“More of a risk-off tone has taken over at the start of this week,” said Lee Hardman, currency strategists at MUFG, who said that there were some concerns that the re-opening of economies in places such as Germany may have led to a pick-up in infection rate.

Against a basket of comparable currencies, the dollar was last up 0.3% since New York’s close, at 100.090.

The safe-haven Japanese yen hit a 10-day low versus the dollar, down around 0.6%, after a U.S. buyer bought a large amount of dollar-yen, forcing the pair above 107.

Also weighing on global risk sentiment is the prospect of worsening tensions between the U.S. and China.

A conciliatory phone call between U.S. and China trade negotiators on Friday staved off fears of an imminent new round of U.S. tarrifs. But U.S. President Donald Trump said he was “very torn” over whether or not to end the preliminary phase one trade deal between the two countries.

On Monday, China warned that it will take countermeasures in response to a U.S. decision to tighten visa terms for Chinese journalists. This news did not move the market, analysts said.

The euro fell against the dollar, last down around 0.3% at $1.08165.

“Developments in the euro area keep Eurozone equities and banks underperforming vs. the rest of the world, which does not help the euro,” Morgan Stanley analysts wrote in a note to clients.

The riskier Australian dollar was down 0.7% versus the U.S. dollar, while the New Zealand dollar was down 0.9% having fallen from around 0400 GMT.

The Swedish crown fell around 0.5% against the dollar, weakening to as much as 9.8150, also down around 0.2% against the euro, at 10.5985.

Minutes from the Riksbank’s latest meeting, published on Monday, showed that Swedish rate-setters were united on seeing balance sheet measures as currently the best way of conducting policy amid the outbreak of the novel coronavirus.

“EUR/SEK is approaching attractive levels to buy, the pair is oversold and no longer reflects the likely central bank easing coming up. We suggest buying EUR/SEK on dips down to 10.55 (the long term support) and target 11.20,” wrote Morgan Stanley analysts.

“All in, the factors which drove the EUR/SEK strength in the past eight years seem likely to continue to hold,” they added.

NEGATIVE RATES

The safe-haven yen hovered near a seven-week high against the dollar on Thursday as investors limited their exposure to riskier assets amid dire global economic data, rising trade tensions and concerns over the euro zone.

The yen last stood at 106.15, after rising to 105.985 per dollar in the previous session, its firmest since mid-March. Against the euro, it traded at 114.66 yen per euro, having hit a 3 1/2-year high of 114.43 overnight.

“The yen is gaining as there are some questions over the European Central Bank’s stimulus, and as tensions between the United States and China increase again,” said Shinichiro Kadota, senior strategist at Barclays.

Germany’s highest court on Tuesday gave the European Central Bank three months to justify purchases under its bond-buying program, or lose the Bundesbank’s participation in one of its main stimulus schemes.

U.S. Secretary of State Mike Pompeo on Wednesday renewed his aggressive criticism of China, as the Trump administration weighs punitive actions against Beijing over its early handling of the virus outbreak.

President Donald Trump said on Wednesday he was closely watching to see if China is fulfilling its obligations under a Phase 1 trade deal the two countries signed in January before the coronavirus spread globally.

“Last month we saw an easing in risk-off trades. But such optimism may not last long,” said Shinji Ishimaru, senior currency analyst at MUFG Bank.

“We are likely to begin to see how severe normalisation will be after the great lockdown.”

A private business survey on China, where most official lockdowns ended more than two months ago, showed the country’s service sectory activity remained mired in contraction in April as layoffs hit a record and export orders plunged.

The Caixin/Markit services Purchasing Managers’ Index (PMI) did manage to pull up to 44.4 in April from 43 in March but was still way below its 51-55 range before the pandemic.

In a further sign of weak consumption in China, the country’s imports dropped 14.2% from a year ago, a bigger decline than economists’ forecast of 11.2% fall.

But exports rose 3.5% despite expectations of 15.7% drop, helping to lift the Chinese yuan and the Australian dollar slightly.

The yuan firmed about 0.1% to 7.0959 to the dollar while the Aussie ticked up 0.25% to $0.6420.

Still, that hardly lifted the global gloom.

In the United States, private employers laid off a record 20.2 million workers in April in response to the novel coronavirus outbreak.

The staggering number, while widely anticipated since 30.3 million people had filed claims for unemployment benefits since March 21, underscored the colossal damage to the economy.

In Europe, euro zone business activity almost ground to a halt last month while retail sales suffered their largest decline on record in March amid government-imposed lockdowns.

In the UK, British construction suffered its sharpest decline on record, more than twice as large as the previous month, even though general construction work was not ordered by the government to stop.

The euro was little changed at $1.0801 after three straight days of falls so far this week, hit also by the German court decision challenging the country’s participation in the European Central Bank’s stimulus.

The British pound eased a tad on Thursday to $1.2322, touching its lowest level in almost two weeks.

The risk-averse mood undermined emerging market currencies, especially those of countries that are struggling to contain the coronavirus.

The Brazilian real dropped to 5.714 per dollar, just a hair above its record low touched last month after rating agency Fitch lowered the country’s credit rating to negative.

Brazil’s central bank slashed interest rates more than expected on Wednesday to shore up the economy though it is likely to undermine the real further.

The currency has lost 4% so far this month, and 29.7% this year, the worst among major emerging market currencies.

The country registered a record number of cases and deaths on Wednesday and has had 1.5 times as many cases as China.

President Jair Bolsonaro has drawn criticism from across the political spectrum for dismissing the threat of the virus as a “little flu.”

The Turkish lira stood at 7.2045 per dollar, close to its all-time low of 7.24 hit during a 2018 currency crisis as the country’s depleted currency reserves added to the pressure.

The dollar rose for a third session against most major currencies on Tuesday, in line with U.S. stocks, bolstered by the prospect of reopenings in some American states and countries around the world, as well as U.S. services data that was stronger than market expectations.

Some analysts said since the onset of the coronavirus pandemic in March, the dollar has developed a positive correlation with U.S. stocks. Typically, the dollar tends to rally when stocks are down and financial markets are under stress.

The dollar is still a safe haven and gains when there is chaos in the market. But when it moves in tandem with risk assets, analysts are no longer surprised.

“There has been a disconnect between equities and economics,” said Mazen Issa, senior FX strategist at TD Securities in New York. “So even though there is a risk rally today, the dollar’s performance, in large part, is tied to relative equity performance.”

U.S. stocks gained on Tuesday, as did crude futures, which advanced 20%, with Brent up around 12% as production fell and countries around the globe, including Italy, Finland and several U.S. states, eased lockdown restrictions.

“This is the situation we’re in right now,” said Issa. “With very low yields, investment alternatives are few and far between and so what it does mean is that the U.S equity market, much like the dollar, is more defensively structured in terms of its sectoral compositions,” Issa said.

The greenback’s gains came at the expense of the euro, which weakened broadly after a German constitutional court ruled that the Bundesbank must stop buying government bonds if the European Central Bank cannot prove those purchases are needed.

The decision did not apply to the ECB’s latest pandemic-fighting program, a 750 billion-euro scheme to prop up the economy, but the ruling unsettled financial markets, which had been calmed by aggressive ECB asset purchases aimed at preventing the pandemic leading to an economic meltdown.

The dollar, meanwhile, edged higher after data showed a better-than-expected reading for the U.S. services sector in April. The U.S. Institute for Supply Management’s non-manufacturing index fell to 41.8 last month, from 52.5 in March, but the April level was higher than the consensus forecast of 36.8.

In afternoon trading, the dollar index was up 0.2% at 99.714.

The euro, meanwhile, fell 0.5% to $1.0850 in the wake of the German court ruling.

The dollar gained 0.7% versus the Swiss franc, another safe-haven currency, to 0.9721 franc, but slipped 0.3% against the yen to 106.450 yen.

Commodity currencies rose with higher risk appetite, with the Australian dollar up 0.6% at 64.57 U.S. cents. It also rose after the Reserve Bank of Australia left its targets for the cash rate and three-year government bond yields unchanged at 0.25%.

Trading was light because of public holidays in Japan and China. The yuan rose 0.2% to 7.1170 per dollar in offshore trade, recovering from a six-week low of 7.1560 hit in the previous session but well below its range last month.

The U.S. dollar surged against most major currencies on Monday amid fears that last year’s U.S.-China dispute will be re-ignited, this time over the novel coronavirus.

U.S. President Donald Trump and Secretary of State Mike Pompeo have pinned the blame for the pandemic on China, where the new coronavirus outbreak is believed to have originated.

The latest salvo came from Pompeo on Sunday, who said there was “a significant amount of evidence” that the virus emerged from a laboratory in the central Chinese city of Wuhan.

“This morning’s session is being dominated by risk-averse trading as investors weigh the negative consequences to global growth from another escalation in U.S.-China tensions,” said Simon Harvey, currency analyst at broker Monex Europe.

“The headlines of further tariffs and supply-chain disruptions come at a time where global growth expectations are already fragile, causing currencies such as sterling and the euro to trade on the back foot this morning despite exit measures set to be announced or implemented in their respective economies,” Harvey said.

The euro was last down 0.4% at $1.0932. Sterling was also down by 0.4% to $1.2442.

The dollar was also rising against Scandinavian currencies, which are so vulnerable to global trade risks. The Swedish crown was last down 0.6% at 9.8995 versus the dollar and the Norwegian crown was falling by 0.8% at 10.3975.

However, the biggest move in the currency markets was the Chinese yuan, which fell to a six-week low of 7.1555 against the dollar in the offshore market. It was last flat at 7.1380, but if falls again, the next levels to watch would be the mid-March low of 7.1651 and early-September low of 7.1975.

Analysts were debating how the United States might attack China again – with more trade tariffs or even cancelling the payments on the U.S. Treasurys that China owns – but they all agreed the dollar/yuan cross would see higher volatility.

“A re-escalation in U.S.-China trade tensions has the potential to bring an end to the relative stability in USD/CNY,” said Lee Hardman, a forex strategist at MUFG.

The moves extended a dour start for May, which began with Friday’s bleak U.S. data and the threat of a fresh trade-war between the world’s two biggest economies.

The dollar fell against the euro and jumped against the Japanese yen on Thursday as investors focused on month-end rebalancing of their portfolios.

The euro bounced and the yen fell sharply just before forex rates were set for the month at the end of the London session.

“It looks flow-driven,” said Erik Nelson, a macro strategist at Wells Fargo in New York, especially as other markets including bank stocks and euro zone bonds didn’t see similar moves. “Nothing has even come close to the move we’ve seen in the euro.”

The euro jumped 0.77% to $1.0957, the highest since April 15. The dollar gained 0.53% against the yen to 107.27.

The cross-currency basis swap for swapping three-month yen LIBOR for dollar LIBOR also turned negative for the first time in a month, indicating strong demand for dollars against the Japanese currency for the end of the month.

The dollar had gained against the euro earlier on Thursday as stocks slipped and after the European Central Bank disappointed some investors who had expected that it would expand bond purchases to junk bonds as part of its quantitative easing program.

It was “a combination of weaker risk and short-term reaction to the ECB announcement that there would be no QE expansion,” said Vassili Serebriakov, an FX strategist at UBS in New York.

The dollar index against a basket of currencies rose to 99.73 after the ECB meeting, before falling back to 98.99, down 0.50% on the day.

The greenback has weakened from more than a three-year peak of 102.99 in late March as global central banks launched massive stimulus measures to protect economies from the coronavirus outbreak.

The Federal Reserve on Wednesday kept interest rates near zero and promised to expand emergency programs as needed to help the battered U.S. economy.

Improving risk appetite, if it continues, could dent the dollar further. Investors are more optimistic that economies globally are closer to reopening.

“If we are seeing a bit of a rebound in risk, and I would say the last week or so has been quite encouraging on that front, then that would suggest that this would take some of the upward pressure off the dollar,” said Craig Erlam, senior market analyst at OANDA in London.