FX Rate News

The dollar fell on Monday while the euro led gains by strengthening half a percent, though currency markets lacked clear direction as surging coronavirus cases kept economic optimism in check.

The global death toll from COVID-19 reached half a million on Sunday, according to a Reuters tally. Cases surged in Southern and Western U.S. states, prompting California to order some bars to close in the first major rollback of efforts to reopen the economy.

Elsewhere, profits at China’s industrial firms rose for the first time in six months in May, suggesting the country’s economic recovery is gaining traction – but the news did little to support oil prices.

The dollar fell against a basket of currencies in the Asia session, recovered briefly in early London trading, before extending falls, down 0.3% at 97.19 at 1015 GMT.

Having fallen more than 1% this month, the dollar is on track for its biggest monthly loss since December 2019.

ING strategists told clients the dollar could be supported by month-end portfolio rebalancing on Tuesday.

“While a quiet data calendar today could see DXY drift down to the 96.80/97.00 area, we’d probably say much follow-through DXY selling beyond those levels looks unlikely,” they said.

There were some signs of investor caution: the Japanese yen was flat on the day, at 107.190, while the safe Swiss franc gained around 0.3% against the dollar, at 0.9449 at 1010 GMT.

But the risky Australian dollar strengthened overnight even after the country reported its biggest one-day rise in new coronavirus infections in more than two months.

It eased off in early London trading on Monday, up 0.2% on the day at 0.6877. The New Zealand dollar was also up 0.2% at 0.6436.

The euro rose 0.6% – its biggest daily jump in a week – reaching as much as $1.128, also rising against the pound, Swiss franc and yen, even though European shares opened lower.

Having touched a one-month low of 1.0628 on Friday, euro-Swiss was up 0.2% at 1.06545.

“The longer the euro can remain in the current 1.1160-1.14 range, the more positive the longer-term outlook,” Kit Juckes, head of FX strategy at Societe Generale, wrote to clients.

French President Emmanuel Macron and German Chancellor Angela Merkel will meet on Monday to discuss the planned European Union coronavirus recovery fund.

Spanish Foreign Minister Arancha Gonzalez Laya said the EU is also expected to have a list of COVID-19-safe countries for travel purposes ready by Tuesday at the latest.

The recovery of economic sentiment in the euro zone intensified in June after a modest pick-up in May, European Commission data showed on Monday.

Goldman Sachs FX strategists wrote in a note to clients last week that they expect a sustained recovery in the global economy to support euro appreciation over the coming months.

“But at least at this stage we would not recommend EUR/USD longs for investors seeking risk-negative dollar shorts – for which the yen remains the best option, in our view,” they added.

Traders were keeping an eye on further U.S. reaction to the national security law to be imposed on Hong Kong.

The dollar held firm on Friday as caution over rapid rises in U.S. coronavirus cases cast doubt over the reopening of the economy, keeping demand for the safe-haven currency intact.

The dollar index stood at 97.360, having pared a large part of this week’s losses.

Against the yen, the dollar traded at 107.09 yen, having gained 0.5% in the overnight session. It has held gains of 0.2% so far this week.

The euro eased to $1.1223, losing steam after hitting a one-week peak of $1.1348 on Tuesday though the currency has maintained weekly gains of about 0.4%.

Sterling slipped to $1.2422, off this week’s high of $1.2541 touched on Wednesday.

Also supporting the greenback was the broader rise in corporate demand towards the end of quarter.

That helped the dollar stay firm despite the stubbornly upbeat risk appetite seen in global equity markets, which comes even as new coronavirus infections surge.

“Stock prices remained supported but I doubt they could retain the current high valuations when more earnings results will come in next month,” said Tatsuya Chiba, manager of forex at Mitsubishi Trust Bank. “At this point, risk currencies could slip again versus the yen.”

Demonstrating to hit to business from the pandemic, footwear maker Nike reported a surprise loss on Thursday even though its online sales post a record rise.

The U.S. health crisis continued as new daily cases around the country climbed to record levels and governor of Texas temporarily halted the state’s reopening as infections and hospitalizations surged.

“When you look at things like restaurant bookings data, it looks as if they are heading back to square one after a strong recovery,” said Kyosuke Suzuki, director of forex at Societe Generale.

“If this continues day by day, people will likely have to review their recovery scenario.”

Data on Thursday showed weak demand is forcing U.S. employers to lay off workers, keeping new applications for unemployment benefits extraordinarily high, even as businesses have reopened.

Initial claims for state unemployment benefits stood at a seasonally adjusted 1.48 million for the week ended June 20, down 60,000 from a week earlier but still double their peak during the 2007-2009 Great Recession.

Elsewhere, the Australian dollar fetched $0.6888, stuck in its rough $0.68-0.70 range in the past couple of weeks.

The Turkish lira stood flat after the country’s central bank unexpectedly halted a nearly year-long easing cycle on Thursday, by keeping its key interest rate unchanged at 8.25% and citing upward pressure on inflation.

The Mexican peso hovered above a one-month low after Banxico, the country’s central bank cut its interest rates by 50 basis points as expected late on Thursday.

The U.S. dollar edged higher on Thursday as factors ranging from rising trade tensions to fears of a second wave of coronavirus fuelled demand for safe-haven currencies.

The dollar index advanced 0.1% to 97.30 but remained below a 2020 high of near 103 in late March.

“A plethora of bad news about the virus led to a major sell-off in risk assets yesterday as volatility returned to financial markets once again”, Deutsche Banks analysts said in a note.

The euro retreated to $1.1242. The British pound fell to $1.2410.

A resurgence of COVID-19 cases from the United States to Kyrgyzstan fuelled fresh fears that the V-shaped economic recovery expected by the market was in jeopardy.

The International Monetary Fund slashed its 2020 global output forecasts further, predicting more damage from the pandemic than it had previously expected.

Also souring the mood was news that Washington is considering changing tariff rates for various European products as part of the trading partners’ aircraft dispute.

Canada’s dollar weakened to a 10-day low versus the U.S. dollar after it became the first country to lose its AAA rating as a result of coronavirus-fuelled government spending.

“The far-reaching financial support the Canadian government has provided to cushion the effects of the corona restrictions have come at a price”, Commerzbank analysts commented.

Commodity currencies, which had been supported by a rally in oil and commodity prices, also fell. The Australian dollar dropped for a second consecutive session to $0.6861.

The dollar paused on Wednesday after two straight days of losses, as money markets tempered hopes of a rapid global economic recovery from the coronavirus pandemic.

The U.S. currency was broadly flat against a basket of currencies, after earlier gains of 0.3%, as risk sentiment soured in trading in Europe.

Selling pressure hit several major currencies, including sterling and the euro, before easing, leaving both broadly unchanged by early afternoon.

The New Zealand dollar remained under pressure, down almost 1% after the country’s central bank said the balance of economic risks remains to the downside and that it is prepared to use additional monetary tools as necessary.

Analysts said caution was warranted given the risk of a second wave of COVID-19 infections, despite improved economic data, including the strongest rebound on record in German business confidence, according to data on Wednesday.

“The risk of a second wave worldwide has not been banished yet and can quickly push the FX market back into the old pattern of `risk aversion is on the up, let’s buy safe havens; i.e., the dollar’ – even under the assumption that the lockdowns imposed in that case would probably be much less severe than the first time round,” Commerzbank analysts said in a note.

The dollar index is down around 1% this week on the improving economic picture, with UK, euro zone and U.S. data earlier in the week supporting riskier currencies at the expense of the safe-haven dollar.

The International Monetary Fund will release revised global growth projections in its World Economic Outlook update on Wednesday (1300 GMT), giving traders a fresh idea of the extent of the economic damage caused by the pandemic and the likely pace of recovery.

The IMF’s last forecasts in April predicted world GDP would fall 3% in 2020.

Spiking coronavirus cases in the United States, Germany and elsewhere are being closely watched.

“We expect over the coming couple of weeks as we get more clarity on this, state governors will be in a better position to decide how to proceed,” RBC Capital Markets’ chief U.S. economist, Tom Porcelli, said of the U.S. cases.

The dollar slipped on Monday in a choppy session as investors tried to navigate their way through an unsettling rise in coronavirus infections and weigh whether it would delay an economic recovery.

The Australian dollar led modest gains in Asia as the head of the country’s central bank said the impact of the COVID-19 pandemic would not be as bad as first feared.

But a record spike in new global cases has capped moves, while moves by Beijing and parts of Australia to re-introduce some restrictions added to the cautious mood.

The risk-sensitive Aussie reversed early losses and was last up 0.3% at $0.6854, the New Zealand dollar rose 0.3% to $0.6422.

Against a basket of currencies, the dollar gave back a bit of last week’s gains and fell 0.2% to 97.501.

“We’ve tried both sides of the story in Asia and as the day’s worn on the bulls have got the upper hand,” said Westpac analyst Sean Callow. “That’s helped the Aussie to avoid breaking any key levels. But it has not been a conclusive day.”

The safe-haven yen hardly moved and was last at 106.87 per U.S. dollar, not far from a one-month high of 106.58 hit earlier this month – underlining the elevated caution.

“We expect the FX markets to remain caught between recovering economic indicators and concerns about a second-wave of COVID-19 infections in the week ahead,” analysts at Barclays said in a note.

Barclays said gains in the euro are possible if Purchasing Managers Indexed due on Tuesday beat expectations and recommended buying euro, with a $1.14 target.

The single currency last traded 0.2% firmer at $1.1200 after dipping to a three-week low of $1.1168 in early trade as divisions among European Union leaders over how to structure a planned COVID-19 recovery fund kept investors wary.

The pound held just above a three-week low at $1.2393, weighed down by prospects of a no-deal Brexit, as little progress has been made in trade discussions between Britain and the European Union.

Mixed bag

The U.S. dollar and Japanese yen held their positions on Thursday as concerns about a rise in new coronavirus cases underpinned demand for safe-haven currencies, while the Norwegian crown was a star performer.

The crown was the biggest mover among major currencies, rising after Norway’s central bank said the country’s economic prospects had improved more than expected in recent weeks and that its key policy interest rate would be kept unchanged for the time being.

The crown “seems to be ticking pretty much all the boxes at the moment”, said Adrian Owens, currency and fixed income portfolio manager at hedge fund GAM, noting that the economic “numbers are coming out better in Norway and the central bank (is) acknowledging this and becoming more hawkish.”

Norway is one of the few countries in the world where inflation is expected to remain around target, supporting the currency, Owens said.

The Norwegian crown was up 0.6% versus the dollar at 9.4560 and by 0.5% versus the euro at 10.6430.

An index tracking the dollar against a basket of currencies was unchanged at 97.09. The dollar has strengthened in recent weeks as investors grappled with fears that the COVID-19 pandemic’s impact on economic growth.

The Japanese yen was last trading neutral at 107 after touching a six-day high of 106.70 in the Asian trading session. It remained close to the one-month high of 106.58 it rose to last week.

“FX markets are mildly risk-off overnight, with only light news flow. Beyond continuing concerns of a COVID-19 second wave, AUD and NZD underperformance is being compounded by weak domestic data,” said Adam Cole, chief currency strategist at RBC Capital Markets.

More than 8.36 million people have been reported to be infected by the novel coronavirus globally and 447,985​ have died, a Reuters tally found.

A surge in new coronavirus infections in several U.S. states and the imposition of travel curbs in Beijing to stop a new outbreak there have served as a reminder of the risks of re-opening economic activity before a vaccine has been developed.

The Australian dollar fell after data showed the economy shed twice as many jobs as expected in May, highlighting the damage caused by lockdown restrictions.

The Aussie dollar was last flat at 0.6882, having fallen earlier to 0.6838.

The euro was also little changed against the greenback, at $1.1250.

The common currency has lost nearly 1% of its value in less than a week as investors questioned whether the European Union would be able to pass an ambitious stimulus plan proposed by the European Commission, given that some countries are opposed to handing out aid as grants.

“It would seem as if euro/dollar has found its new comfort zone in the area of 1.12-1.14. Only the political front might provide some momentum,” said Thu Lan Nguyen, a currency analyst at Commerzbank.

Elsewhere, the British pound was trading 0.2% lower both against the U.S. dollar and the euro, at $1.2518 and 89.75 pence respectively, following the Bank of England announcement on rebuilding its war-chest for fighting the coronavirus crisis.

The dollar steadied on Monday and commodity currencies erased some losses as the “risk-off” sentiment which dominated overnight trading eased somewhat.

Equity markets fell in early London trading, with many analysts citing fears of a second wave of COVID-19 infections.

China re-introduced restrictions in some areas after Beijing reported its biggest cluster of new infections since February.

In the United States, more than 25,000 new cases were reported on Saturday alone.

Against a basket of currencies, the dollar rose overnight, gaining 0.4% between 0440 GMT and 0700 GMT. It then erased some gains, and was at 97.12 at 1015 GMT.

Societe Generale FX strategist Kenneth Broux said the market had reacted to news about rising coronavirus infections. Market consensus is that the dollar’s gains peaked in March, and traders are now pausing for profit-taking, he said.

Commerzbank’s head of FX and commodity research Ulrich Leuchtmann said there had long been news of new infections, and the fact that other safe-haven currencies did not strengthen suggested the dollar’s rise was more a product of its recent weakening.

“In my view it is all much more trivial. Following a pronounced period of USD weakness it is now time for a correction and profit-taking,” Leuchtmann said.

The Australian dollar fell to a 13-day low versus the dollar in early London trading before erasing some losses to 0.6805 , down 0.7%. The New Zealand dollar was down 0.4% .

The safe-haven Japanese yen held firm against the dollar and was little changed from Friday’s close at 107.36.

Industrial output in China rose for a second consecutive month in May, but the rise was smaller than expected, suggesting the world’s second-biggest economy is struggling to get back on track after containing the coronavirus.

“More evidence of economic recovery in China is a positive development for the global economy, although market participants understandably remain on edge over the risk of further disruption from second waves,” MUFG currency analyst Lee Hardman wrote in a note to clients.

European countries eased some border controls on Monday following coronavirus lockdowns, a move that could help salvage part of the summer season for Europe’s battered travel and tourism industry.

The euro was broadly flat against the dollar at $1.1251 .

Financial markets may be in the process of repricing the world’s most-traded exchange rate, with derivative contracts suggesting the euro could surge by as much as 6% against the dollar to $1.20 by year-end.

As oil prices fell, the Norwegian crown hit a 4-week low versus the euro. It then erased some losses to stand at 10.9145 by 1037 GMT, down around 0.5% on the day.

The Bank of England, Swiss National Bank and Norges Bank will all hold meetings on Thursday and are expected to keep their main policy rates unchanged.

The safe-haven dollar, yen and Swiss franc gained on Thursday as U.S. stocks tumbled amid diminished expectations that the global economy would recover swiftly from the coronavirus pandemic.

The yen rose to a one-month high against the dollar, while the Swiss franc climbed to a fresh three-month peak.

The dollar index, though, gained for the day, as investors sold currencies associated with risk-taking such as the euro, sterling and the Australian dollar.

“Today, the animal spirits aren’t so strong,” said Marc Chandler, Chief Market Strategist at Bannockburn Global Forex in New York. “One trade is rippling through the markets: taking profits on equities, beating up on emerging markets, unwinding gains in these leading currencies and flocking to the safety of the debt markets.”

Currency traders took their cue from the U.S. stock market, where the S&P 500 was on track for its worst day since March.

“This historic gain in equities is getting a reality check. There are some concerns about re-infections, but my thought is that today is not so much different from the beginning of the week,” said John Doyle, vice president of trading and dealing at Tempus Inc. in Washington. “But perhaps because of how fast and how hard equities have gone up and the dollar has gone down, traders are looking for an excuse to take profits and take them off their highs and the dollar off their lows,” he added.

Since late May, with better-than-expected economic data and as economies and U.S. states started to re-open, the dollar has fallen 3.5% against the currency basket.

Demand for safe-haven currencies increased after the Federal Reserve issued a dire outlook on Wednesday. Following its two-day meeting, the Fed signaled it plans years of extraordinary support for the U.S. economy, which policymakers project will shrink by 6.5% in 2020, with the unemployment rate at 9.3%.

Investors were also worried about new coronavirus infections as the world gradually reopened following shutdowns aimed at curbing the spread of the disease.

In the United States, new infections are rising slightly after five weeks of declines, according to a Reuters analysis. Part of the increase is due to more testing, which hit a record high on June 5 of 545,690 tests in a single day but has since fallen.

In afternoon trading, the dollar fell 0.3% against the yen to 106.84 yen, after earlier dropping to a one-month trough.
The dollar also slid to a three-month low versus the Swiss franc of 0.9399 franc, and was last down 0.2% at 0.9424 franc.

Against a basket of currencies,, however, the dollar rose 0.5% to 96.681, led by gains versus the euro. The euro dropped 0.5% to $1.1314.

High-beta currencies heavily geared toward global growth, such as the Australian dollar and the Norwegian crown, led losers, falling more than 1% against the dollar.

The pound fell against the dollar and euro on Thursday, on track to end its longest winning streak against the U.S. currency in 2-1/2 years as Brexit-related concerns and speculation about negative rates weighed on sterling again.

The pound had risen 3.9% against the dollar in 10 consecutive days of gains starting on May 28 – its longest winning streak since January 2018.

Analysts say it is behaving like a “risk currency”, in that it strengthens when improving market sentiment weakens demand for the safe-haven dollar.

“Sterling has been rallying against the U.S. dollar. While we see specific reasons for an appreciation of the pound, the move underlines the broader vulnerability of the U.S. dollar, especially as fears over COVID-19 subside,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

But this trajectory looked set to end on Thursday, as the pound changed course and fell back below $1.27.

The dollar bounced against riskier currencies after the U.S. Federal Reserve’s economic outlook spooked investors.

Versus the dollar, the pound fell as much as 0.8% on the day to $1.2651 at 0710 GMT, having risen to a three-month high above $1.28 on Wednesday. By 1025 GMT it was down 0.5% at $1.2687, having eased some losses as the dollar’s gains wore off.

Against the euro, the pound fell overnight, then steadied in early London trading. By 1025 GMT it was at 89.70 pence, down around 0.5% on the day..

The market has its largest net short speculative position on the pound since November 2019, as Brexit and speculation about negative rates pose downside risks.

Britain has left the European Union but the main terms of its membership remain in place during a transition period until the end of 2020, by when both sides hope to negotiate a new trade deal.

“Sterling on its back foot and a weak close today could point to a consolidation toward 1.2500, with the prospect of tough Brexit negotiations stretching out from here,” John Hardy, Saxo Bank’s head of FX strategy, wrote in a note to clients.

Britain has until the end of the month to request an extension to the transition period. A fourth round of Brexit negotiations ended with little progress.

The EU’s Brexit negotiator, Michel Barnier, urged London to adjust its demands on Wednesday, saying Britain was seeking a trading relationship with the EU that was too close to that of a member.

A Reuters poll of more than two dozen economists gave a median forecast for an 18.4% month-on-month plunge in Britain’s gross domestic product in April – although there was an unprecedented range of views.