Dollar set for worst August in five years

The dollar was set for a fourth straight month of losses on Monday after a U.S. Federal Reserve policy shift on inflation, while the euro was poised to post a fourth month of gains, taking both currencies to levels last seen in 2018.

Investors are adjusting to a speech last Thursday in which Federal Reserve Chair Jerome Powell outlined an accommodative policy change which is believed could result in inflation moving slightly higher and interest rates staying lower for longer.

“Even if U.S. central bankers are likely to be pleased about the interpretation of their measures, it is not good news for the dollar”, Commerzbank analysts commented.

“If one expects the domestic purchasing power of the dollar to be eroded more quickly (as that is what inflation is) it is difficult to assume that it will maintain its purchasing power on the FX market in the long run”, they argued.

“That is why EUR-USD is trading above 1.19, with the dollar index (DXY) trading below 92.50”, they concluded.

Against a basket of currencies the dollar rose 0.1% higher to 92.356 in early trading in Europe and is down 1.2% for the month.

If sustained that would be its worst August in five years and make for the longest run of monthly losses since the summer of 2017.

The euro  was steady at $1.1903 and on track for a 1% monthly gain, which would be its fourth straight month of increases.

With most of London’s traders off on a banking holiday, attention now turns to a handful of Federal Reserve officials due to speak through the week, beginning with Richard Clarida, as they put more flesh on the bank’s new policy framework.

Eurozone inflation data on Tuesday and U.S. payrolls on Friday will also be closely watched.

Earlier the yen  steadied on the view that Japan’s next leader will stay the course on the ‘Abenomics’ economic revival programme.

The yen eased by about 0.4% in Asia to 105.77 per dollar, having climbed as far as 104.195 on Friday in the wake of Shinzo Abe’s resignation as prime minister for health reasons.

Elsewhere trade was choppy as the boost to Asian currencies from a solid expansion in China’s service sector had begun to fade a bit.

The Australian dollar  was down 0.2% after touching a 21-month peak of $0.7381 but remained set to post a fifth straight monthly rise, its best streak in over a decade and a 34% gain from March’s trough.

The New Zealand dollar made a post-COVID high of $0.6749 but also slightly retreated 0.2% thereafter.

China’s yuan hit a 14-month peak of 6.844 to the dollar in offshore trade as investors cheer the services growth rather than fretting about a stalled rebound in manufacturing.

It later abandoned some gains and was last at 6.8556.

Dollar sags as investors brace for dovish Fed signals

The dollar wallowed near its lowest level for the week on Thursday as investors looked for hints from Federal Reserve Chairman Jerome Powell that the central bank might tweak its policy framework to help push up inflation.

Powell is scheduled to address the Fed’s annual central bankers’ conference later in the day, usually held in Jackson Hole, Wyoming, but being conducted virtually this year because of the ongoing Covid-19 pandemic.

Investors are betting the U.S. central bank will introduce a new policy framework to fight persistently low inflation as early as next month.

“If the Fed turns out to be less dovish than many have been thinking, we could see a rally in the dollar,” said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.

The dollar’s index against six major currencies stood at 92.893, near the weakest level so far this week, and not far off its two-year low of 92.124 touched last week.

Since the start of the pandemic, the Federal Reserve has expanded its balance sheet by as much as about $3 trillion, far more than the European Central Bank and the Bank of Japan.

The euro changed hands at $1.1833, near its highest level so far this week, though few market players expect a clear break from its range so far this week ahead of Powell’s speech.

The dollar yen slipped to 105.97, losing steam after hitting a one-week high of 106.58 on Tuesday.

“A more aggressive Fed policy tends to weaken the dollar, and the broadcasting of this policy change has already been a factor in the recent mild yen strength,” said John Vail, chief global strategist at Nikko Asset Management.

A key focus for the yen is Prime Minister Shinzo Abe’s news conference scheduled for Friday amid rising speculation over his health.

The yen is likely to gain should Abe decide to resign, given perception that aggressive monetary easing with close co-operation between the government and the central bank, dubbed Abenomics, has been one of his trademark policies, traders said.

The British pound stood firm at $1.3211, having gained 0.9% since the start of week, while the Australian dollar was changing hands at $0.7238 up 1.1% so far this week.

The Chinese yuan was at its strong levels since January after data showed a recovery in profits at China’s industrial firms.

The offshore yuan stood at 6.8783 per dollar, its highest level since January 21.

The market appears to have shrugged off the latest signs of rising tension between the two countries.

The United States on Wednesday blacklisted 24 Chinese companies and targeted individuals it said were part of construction and military actions in the South China Sea, its first such sanctions move against Beijing over the disputed strategic waterway.

Dollar drifts ahead of key Fed speech as economic worries grow

The dollar held steady against most currencies on Wednesday as traders braced for U.S. data expected to show a slowdown in durable goods orders and a key speech by Federal Reserve Chairman Jerome Powell.

The yuan rose toward a seven-month high after U.S. and Chinese trade officials reaffirmed their commitment to a phase one trade deal, which eased concerns about a diplomatic standoff between the world’s two-largest economies.

The greenback took a hit after data on Tuesday showed U.S. consumer confidence tumbled to the lowest in more than six years due to concerns about coronavirus-induced job losses.

Traders will look to Powell’s speech on Thursday at the annual Jackson Hole retreat to determine what steps the Fed is willing to take to safeguard a fragile economic recovery.

“I expect Powell to use forward guidance to send a dovish message that rates will remain low for a long time, which feeds into dollar weakness,” said Minori Uchida, head of global market research at MUFG Bank in Tokyo.

“You could say we are in a long-term correction of excessive dollar strength.”

Against the euro, the dollar stood at $1.1816 on Wednesday following a 0.4% decline in the previous session.

The British pound bought $1.3138 having risen 0.7% against the dollar on Tuesday.

Sterling has managed to shrug off a lack of progress in trade negotiations between Britain and the European Union.

The dollar bought 0.9090 Swiss franc, close to the lowest in more than five years against the safe harbor currency.

The dollar was locked into a narrow range against the yen, last trading at 106.43.

Powell’s speech at Jackson Hole – held online due to the coronavirus outbreak – is by far the biggest event of the week, but the data calendar leading up to Thursday has been discouraging.

Data later on Wednesday is forecast to show growth in U.S. durable goods orders slowed in July, following from the U.S. consumer confidence report for August, which fell to the lowest since May 2014 – highlighting policymakers’ concerns about the economy.

The onshore yuan rose to 6.9002 per dollar, approaching a seven-month high after Washington and Beijing affirmed their trade deal.

The mood also brightened after Ant Group, Alibaba’s fintech arm and China’s dominant mobile payments firm, filed for a dual listing in Hong Kong and Shanghai to raise as much as $30 billion in what would be the world’s largest initial public offering.

The Australian dollar was little changed at $0.7195 as traders monitor a coronavirus outbreak in the state of Victoria.

The New Zealand dollar last bought $0.6552.

Dollar falls, riskier currencies gain, ahead of Republican convention

The dollar fell on Monday while European shares and riskier currencies gained, with some analysts attributing the pick up in sentiment to U.S. regulators approving a treatment for COVID-19 patients ahead of the Republican National Convention.

More than 800,000 people around the world have died from the coronavirus, with the death toll in the United States alone surpassing 170,000. On Sunday the country granted “emergency use authorization” for treatment using the blood plasma of patients who have recovered from the disease.

Asian shares strengthened overnight and European indexes opened higher. Riskier currencies such as the Norwegian crown , British pound and Aussie and Kiwi dollars rose versus the U.S. dollar.

The dollar was little changed overnight but fell as markets opened in Europe, down around 0.2% at 92.972 by 1053 GMT. It has lost 0.5% against the basket of currencies so far this month, consolidating losses after falling 4% the month before.

Derek Halpenny, MUFG’s head of research, said that the announcement about blood plasma treatment was likely to have only a short-term impact on sentiment.

“I think investors generally will be relatively sceptical of the news especially coming from Trump between now and the election,” he said.

“There’s obviously a very significant incentive for him to speed up the approvals or big up the emergence of some good news.”

“I think the markets are still relatively positioned for a vaccine being done and dusted by year-end and gradually rolled out in the first half of 2021,” he added. “I think it would take a lot for the markets to price in something more rapid than that.”

In a data-light day, market participants are awaiting the start of the four-day Republican National Convention, at which U.S. President Donald Trump will seek to reboot his struggling election campaign.

The euro was up around 0.3% versus the dollar, at $1.183 .

Last week, the dollar outperformed the euro for the first time since mid-June, as U.S. business activity improved while European business surveys showed the economic recovery faltering.

The euro had previously rallied as the continent controlled the spread of the coronavirus better than in the U.S., and European Union leaders agreed on an EU-wide recovery fund.

France posted a record high in daily post-lockdown infections on Sunday. The health minister on Saturday ruled out a total lockdown but said localised measures could be taken.

Italy also said it was not considering a new lockdown despite a rising number of infections.

“I do think the re-emergence of COVID is going to have a clearer impact on the incoming economic data and certainly the euro gain has been a picture of a more favourable outlook in Europe – not just on COVID but on the policy response and the euro recovery fund etc – but generally that relatively macro story is less compelling,” MUFG’s Halpenny said.

The Australian dollar was up 0.5% versus the greenback at 0.719, little affected by the country’s treasury saying that effective unemployment will climb above 13%.

New Zealand Prime Minister Jacinda Ardern on Monday extended a coronavirus lockdown in Auckland, the country’s largest city, until the end of the week and introduced mandatory mask wearing on public transport across the nation.

The Kiwi dollar did not strengthen as much as other risk currencies, up 0.2% at 0.6554.

ING strategists said the market is also grappling with geopolitical concerns, with the protests in Belarus posing the risk of direct intervention by Russia.

Elsewhere, China’s foreign ministry said it would file a lawsuit against the Trump administration over its ban on Bytedance, the Chinese owners of messaging app WeChat and video-sharing app TikTok.

Dollar bounce falters in Asia as Fed shock fades

The dollar clung to gains on Thursday, after minutes from last month’s U.S. Federal Reserve meeting gave few clues about whether an even more dovish shift in its policy framework is possible in the autumn, disappointing some dollar bears.

A heavily shorted greenback put on its biggest one-day surge since March after the release, hitting 93.159 against a basket of currencies, about 1% above Tuesday’s two-year trough.

But in the wash up, it couldn’t extend the bounce, and other majors mostly nursed their losses during the Asia session with little spillover from a sharp sell down in equities.

Exceptions included the Korean won, which dropped 0.4% along with a tumble on the Kospi share index, and the Thai baht, which hit a three-week low of 31.44 per dollar as investors started to worry about anti-government protests.

Speculation has been rife the Fed will adopt an average inflation target, and seek to push inflation above 2% to make up for years it has run below, or look to cap government bond yields as part of a broader policy review.

The minutes were vague on the matters and merely said “a number” of Fed members thought it would be helpful to make a revised statement on its policy strategy at some point, without providing details or timing.

After hitting an 18-month high of $0.7275 before the meeting, the Australian dollar fell back below 72 cents and last sat at $0.7185. The New Zealand dollar dropped almost 1.3% from its intraday high to sit at $0.6567.

The euro – the most stretched of all recent gainers on the greenback – fell back below $1.19 and last sat at $1.1849. The pound was dumped back to $1.3106 and the dollar jumped about 0.7% on the yen to 106.00.

“Traders were hoping (the minutes) would cement a clear consensus in the Fed’s ranks for a series of key changes in the 18 September meeting,” said Chris Weston, head of research at broker Pepperstone in Melbourne.

″(But) there seems little consensus in the Fed collective to adopt an inflation-targeting regime, which is what so many have positioned for.”

Bounce or breather?

The dollar’s rebound pulls it back to more or less flat for the month so far against a basket of currencies.

But the fact that the bounce didn’t carry on in Asia, even when the stock market mood soured, suggests plenty of investors reckon the slide that has sent it down by 10% since March has still got further to run.

Short bets against the world’s reserve currency had risen to their largest since 2011 last week and long bets on the euro were at a record high.

“We mainly view yesterday’s movement as the market taking a breather on dollar weakness,” said OCBC Bank strategist Terence Wu in Singapore.

“The retracement has yet to breach significant technical levels…we are skeptical about the shelf-life of this bounce.”

Commonwealth Bank of Australia shares that view and upped its forecasts for the Aussie, kiwi and pound this year and now thinks the euro can hit $1.26 by September 2021.

The Fed minutes also sounded pretty gloomy about the economic outlook, and will be ringing in investors’ ears as they await the Philadelphia Fed business index at 1230 GMT – especially following a weak reading from New York on Monday.

For the Fed itself, the focus now shifts to whether more will be revealed at the August 27 to 28 virtual Jackson Hole symposium or at September’s meeting.

Elsewhere the Chinese yuan was steady after China kept benchmark interest rates steady, as expected. It last changed hands at 6.9218 per dollar in onshore trade.

Dollar falls to 27-month low as U.S. stocks hit record highs

The U.S. dollar index fell to its lowest in more than two years on Tuesday as the ongoing effects of the Federal Reserve’s stimulus programs weakened the greenback broadly for the fifth consecutive day and lifted U.S. stock indexes to record highs.

Although the dollar often functions as a safe-haven investment in moments of crisis, it has fallen since the Federal Reserve’s intervention into financial markets to maintain liquidity in the midst of the coronavirus pandemic. The Fed’s programs have pushed risk assets to all-time highs and reduced demand for safe-havens, even as economic data has painted a bleak picture of the U.S. recovery.

The dollar index was last down 0.55% at 92.308, having earlier hit a bottom of 92.124, its lowest since May 2018. Against the euro, the dollar also hit its lowest since May 2018 at $1.197.

The dollar was also weaker against the Japanese yen, another traditional safe-haven, having hit a two-week low of 105.27 yen per dollar.

“It’s the Fed, it’s all the liquidity being pumped into the market,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets, about the fall in the dollar.

A fresh rally in tech stocks provided a positive backdrop for markets and drove the S&P 500 index to a record high, topping the last record hit on Feb. 19 and further underlining the disconnect between the stock market and U.S. economic data.

Anderson noted that the Tuesday’s dollar weakness was not the result of any specific data release, but about a move lower that has been gaining momentum.

“Once U.S. dollar momentum becomes entrenched, it’s like trying to turn around an aircraft carrier, it is tough to do. And I think the momentum is entrenched,” he said.

Net bearish bets on the greenback rose to their largest since May 2011 last week, and spot trade in recent days suggests the position has only grown further since. Elsewhere in North America, the Canadian dollar strengthened to $1.315, its best versus the greenback since late January. The move came after Canadian Prime Minister Justin Trudeau appointed his close ally and deputy Chrystia Freeland as finance minister on Tuesday as he revamps pandemic recovery plans.

″(Bill) Morneau has been a very solid finance minister. In a lot of situations, to lose that would be a bit destabilizing. But in this particular instance, Chrystia Freeland has also done a remarkable job with her file,”

Dollar falls as selling pressure builds on multiple fronts

The dollar extended its fall to hit fresh lows against a range of currencies on Tuesday, after a triple blow of retreating yields, soft U.S. economic data and a dip in safe-haven demand exerted broad selling pressure.

The yuan firmed to 6.9246 per dollar, hitting a level unseen since March 9, despite the Trump administration flagging a further tightening of restrictions against Chinese tech gear maker Huawei.

Against the Swiss franc, the dollar fell more than 0.1% to fresh 5-1/2 year low of 0.9049.

“The background factor for the moves we’re seeing today is the overall weakness of the dollar,” said Shinichiro Kadota, senior strategist at Barclays.

“And the Swiss franc strengthened because of a euro-led decline in the U.S. dollar since July.”

The greenback is also poised to re-test multi-month or multi-year troughs against the euro, pound and Aussie made earlier in the month.

The euro last sat at $1.1891, just below a recent two-year high of $1.1916.

The Aussie rose 0.12% to $0.7225, near an 18-month top of $0.7242 hit on Aug. 7, as the Reserve Bank of Australia reaffirmed the outlook of steady policy.

The Aussie’s gains were capped by news China had begun an anti-dumping investigation into imports of wine from Australia.

Investors have been relieved by a delay in the review of the U.S.-China trade deal this week, which has left the agreement standing and reinforced a belief the trade relationship can hold even amidst conflict on multiple other fronts.

A fresh rally in tech stocks added to the positive mood, and together with a pullback in U.S. yields and a weak reading in a U.S. manufacturing survey has many traders sticking to their bearish convictions on the dollar.

Net bearish bets on the U.S. dollar grew to their largest since May 2011 last week and spot trade in recent days suggest the position has only grown further since.

“Extended short dollar positions risk a sharp pull back if the dollar downside stalls further, but for now the negatives for the dollar are mostly still in place,” said analysts at Singapore’s OCBC Bank.

“We are reduced to staying in the game while the music is playing.”

On the data front, the New York Fed’s Empire State business conditions index tumbled to 3.7 in August from 17.2 in July – far lower than the 15 points forecast by a Reuters survey.

Delinquency rates for residential mortgages also posted the largest quarterly increase on record.

“A high delinquency rate for an extended period can impair the banking system,” said Commonwealth Bank of Australia currency analyst Joe Capurso.

“An impaired banking system could hold back the U.S. economic recovery like it did in the aftermath of the (2008 crisis),” he said.

The Japanese yen rose back past 106-per-dollar to 105.63 after a 2.6 basis point drop in benchmark U.S. 10-year government bond yields overnight.

The British pound last sat at $1.314 as investors watch the latest round of Brexit negotiations, with the future of London’s financial institutions’ access to the European market in focus.

Against a basket of currencies the dollar sat at an eight-session low of 92.634.

Among G10 currencies, the kiwi was the laggard as New Zealand’s largest city remains under lockdown and anticipation of future monetary easing weighs on the currency.

It last bought $0.6545 and traders said bets on the kiwi dropping had supported the Aussie as investors sought exposure to the Aussie/kiwi cross, which is trading at a two-year peak.

“The move has been one way traffic,” said Chris Weston, head of research at Melbourne broker Pepperstone, who is holding for the ride even though the pair has hit his price target of NZ$1.10 per Aussie.

Dollar in the doldrums; U.S. politics, Fed minutes eyed

The U.S. dollar began Monday where it left off last week, caught between pressure from worries about the lagging U.S. economic recovery and support from rising U.S. bond yields and safe-harbor demand.

A boost to sentiment from the postponement of the U.S-China trade deal review – which leaves the deal intact – was muted by uncertainty, ahead of a week a week that includes Federal Reserve minutes and the Democrats’ nomination convention.

Against a basket of currencies the dollar traded under gentle pressure at 93.039 on Monday, roughly in the middle of the range it has held since hitting a two-year low at the end of July.

The risk-sensitive Australian dollar inched up to a three-session high of $0.7194, but also remained contained in the channel it has traded in for a week.

Other Asian currencies, such as the won and rupiah edged lower, while the kiwi remained weighted at $0.6534 by last week’s dovish language from the central bank.

The yen was steady at 106.54 per dollar, having dipped last week as a jump in U.S. yields drew Japanese investment to U.S. Treasuries.

Review delay

The United States and China delayed a Saturday review of their Phase 1 trade deal, people familiar with the plans told Reuters, citing scheduling conflicts.

“That’s good news in the sense that it’s something we can place on the back burner for now,” said National Australia Bank senior foreign exchange strategist Rodrigo Catril.

“But there are other uncertainties coming up that need to be resolved,” he said, pointing to U.S. politics as a presidential election looms, and new virus hot spots in Europe that could challenge the perception that the euro is on an uptrend.

U.S. President Donald Trump also flagged a broadening of his pressure on Chinese tech firms such as e-commerce giant Alibaba Group Holding Ltd.

The yuan, often a barometer of relations between the two countries, was unmoved in offshore trade on Monday morning, and last traded at 6.9364 per dollar.

Election delay

Elsewhere, in Japan, data showed the world’s third-largest economy suffered its acutest economic contraction on record in the second fiscal quarter as the COVID-19 pandemic crushed business and consumer spending.

New Zealand delayed a general election by a month as it grapples with a new outbreak of the pathogen, while there have been flare-ups in infections in South Korea, Spain and France.

The euro and sterling were steady in Asia, with the euro last buying $1.1844 and sterling $1.3095.

On the horizon, the Democratic national convention in the United States begins on Monday, and is something of a starting gun for the final sprint to the November election. It culminates in a speech from presumptive nominee Joe Biden late on Thursday.

Markets are also on edge ahead of the release of Federal Reserve minutes on Thursday, looking for any hints of a possible change to the central bank’s guidance at its next meeting in September.

Investors are expecting more tolerance in the Fed’s approach to inflation, said Chris Weston, head of research at Melbourne brokerage Pepperstone.

“The bond market is key here and if the Fed can drive down real yields then the dollar will follow, and gold will rally – and vice versa,” he said.

Dollar finds support as coronavirus, China data sap confidence

The dollar steadied on Friday as a jump in U.S. bond yields and a drag on sentiment from lackluster Chinese economic data put the brakes on a selldown of the world’s reserve currency.

China’s retail sales unexpectedly extended their fall into a seventh month in July and industrial output missed expectations – suggesting bumps in even the world’s most promising rebound.

The mood had the dollar within reach of snapping a seven-week losing streak against the risk-sensitive Aussie, which has settled around $0.7149 and is flat for the week.

Tepid demand in a long-dated U.S. government bond auction on Thursday has also extended a surge in Treasury yields that has drawn some investors – especially from Japan – back to dollars.

The yen is on course for its weakest week against the dollar in two months and is down about 0.9% at 106.84 from last Friday’s close.

The biggest loser has been the kiwi, which was pressured at $0.6538, as the country faces a fresh coronavirus outbreak and after the central bank this week flagged increased bond buying and again mentioned the prospect of negative rates.

“Risk sentiment is slowing down,” said Westpac FX analyst Imre Speizer.

“It’s too early to say the whole (dollar) downtrend is over…but it’s got potential and at the very least it’s putting a cap on the Aussie and kiwi.”

Troubling signs also emerged on the health front in Asia, with 29 new cases in previously virus-free New Zealand prompting an extension of Auckland’s lockdown and the biggest daily jump in new cases in South Korea since March.

Against a basket of currencies the dollar remains 0.2% lower for the week, but it has appeared to arrest a slide that has it about 9.5% below its March peak.

Preliminary European employment and GDP numbers due at 0900 GMT and U.S. retail sales figures at 1230 GMT are the next set of data for investors to parse for signs of divergence between the U.S. and European recoveries.

Gathering faith in Europe’s rebound, and doubts in the United States as the virus spreads and politicians remain deadlocked over the next relief package, have kept the euro firm even as the dollar has been able to bounce a bit elsewhere.

A fall last week in the number of applications for unemployment benefits in the United States to below one million was welcome surprise, but with some 30 million out of work and stimulus plans stalled the outlook remains grim.

The euro hung on at $1.1816 in the Asia session on Friday and the pound was also steady at $1.3062, as investors have sought to focus on a rebound in growth in June rather than the diabolical quarterly contraction.

Another element of divergence has opened up in the Tasman Sea, where central banks on either side – in Australia and New Zealand – are striking quite a different tone.

The Reserve Bank of New Zealand sparked a bond rally this week by promising to extend its own purchases and, next week, speed them up as well.

And while the RBNZ talked about sub-zero rates, Reserve Bank of Australia Governor Philip Lowe re-iterated on Friday that fiscal support was what’s needed.

″(The RBNZ) are pro-active,” said Chris Weston, head of research at Melbourne brokerage Pepperstone.

“And if they want something they don’t sit on their hands to see how things evolve, they make it happen, or at least they try. This to me is why AUD/NZD is likely going higher,” he said.

The Aussie last sat at a 22-month high of NZ$1.10941, having forged nearly 1% this week and the spread between Australian and New Zealand 10-year debt, at 28 basis points, is at its widest since May.

Dollar loses ground amid doubts about U.S. stimulus

The dollar fell against most of its peers on Thursday amid fading hopes for a compromise between Republicans and Democrats over additional stimulus for the U.S. economy.

The Australian dollar rose after better-than-expected jobs data eased concerns about a persistent coronavirus outbreak in the country’s second-largest city.

The greenback was hampered by a decline in Treasury yields, but analysts say this is likely only a temporary setback because U.S. lawmakers will eventually agree to more stimulus to help the economy recover from the coronavirus.

“The dollar needs positive news on stimulus to rise further, but I’m sure we’ll get there, because these politicians can’t go back to their constituencies empty handed,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

“Once this happens, gains in dollar/yen could be a catalyst for dollar gains against other currencies.”

Against the euro, the dollar fell to $1.1804, adding to a 0.4% decline on Wednesday.

The British pound rose 0.15% to $1.3053.

The dollar fell 0.2% against the safe harbor Swiss franc to 0.9118.

The dollar pulled back from a three-week high to trade at 106.78 yen.

The onshore yuan briefly rose to a five-month high before steadying at 6.9421 per dollar as nerves set it before U.S. and Chinese officials meet Saturday to review their phase one trade deal.

President Donald Trump accused congressional Democrats on Wednesday of not wanting to negotiate over a U.S. coronavirus aid package as top Republican and Democratic negotiators traded blame for a five-day lapse in talks over relief legislation.

The pandemic has taken a particularly heavy toll on the United States, where it has killed more people than any other country. Millions of U.S. workers have lost jobs, and supplemental federal unemployment benefits expired last month.

Market sentiment has swung between optimism and pessimism, but analysts argue that more stimulus is the most likely outcome because without it the U.S. economic recovery could stall.

The U.S. dollar index against a basket of major currencies was little changed on Thursday but was still well above the two-year low it reached last week.

Elsewhere in currencies, the Australian dollar traded at $0.7161, supported by data showing the economy created three times as many jobs as expected in July.

The positive jobs data suggests the economy remains resilient in the face of an ongoing outbreak of coronavirus cases in Melbourne.

Across the Tasman Sea, the New Zealand dollar fell slightly to $0.6566.

The Reserve Bank of New Zealand will consider more monetary stimulus if there are periods of resurgence in local coronavirus infections and renewed lockdowns in the country, Deputy Governor Geoff Bascand told Reuters on Thursday.

New Zealand this week locked down its biggest city, Auckland, and reimposed social distancing rules across the rest of the country as new coronavirus cases were reported, ending a 102-day run of no infections.