FX Rate News

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.

The dollar nursed losses against most currencies on Wednesday amid some speculation the U.S. Federal Reserve could take steps to curb a recent rise in bond yields at its policy meeting.

The Australian and New Zealand dollars pulled back slightly against the greenback but sentiment remained positive as economic activity resumes in both countries following the lifting of coronavirus restrictions.

The main focus is a Fed policy meeting later on Wednesday. While no major changes are expected, recent rises in yields have pushed up the dollar due to increasing signs the U.S. economy is stabilizing, but a full-fledged recovery  from the coronavirus outbreak is still distant.

Some analysts are playing down the chance the Fed will adopt yield curve control to guide 10-year Treasury yields lower, but uncertainty about the outcome of the Fed meeting could keep the dollar under pressure.

“The Fed can afford to wait and see on yield curve control because the U.S. economy has gotten past the crisis phase and only just entered the healing phase,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

“The markets got overly optimistic and are adjusting lower, but this is a good chance to buy the dollar on the dip.”

The dollar was little changed at 107.72 yen on Wednesday in Asia following a 0.6% decline in the previous session.

Against the British pound, the greenback traded at $1.2732, close to a three-month low.

The dollar bought 0.9512 Swiss franc on Wednesday in Asia after falling 0.7% on Tuesday.

The yield on benchmark 10-year Treasury notes was little changed at 0.8270% on Wednesday. Long-term Treasury yields fell on Tuesday and the yield curve flattened slightly as traders adjusted positions before the Fed meeting.

U.S. central bankers on Wednesday will also publish their first economic projections since the coronavirus pandemic set off a recession in February.

Estimates are expected to signal a collapse in output this year and near-zero interest rates for the next few years.

The Australian dollar pulled back from an 11-month high to trade at $0.6958, while the New Zealand dollar fell from its strongest level since late January and settled at $0.6961.

The Antipodean currencies have been on a stellar run against the greenback due to hopes for economic recovery, prompting some investors to book profits.

Some traders are worried about a deterioration in diplomatic relations between Australia and China, which has also weighed on the Aussie.

Elsewhere in Asia, the Chinese yuan and the Korean won drifted higher against the dollar, but trading was subdued overall as investors avoided big moves before the Fed’s meeting.

The euro traded at $1.1340. Against the pound, the common currency bought 89.10 pence, on course for a second day of gains.

Concerns about progress in trade talks between Britain and the European Union continue to hamper both the euro and the pound.

The EU’s chief Brexit negotiator, Michel Barnier, is scheduled to speak later on Wednesday, which may yield details that will help determine whether market sentiment will improve.

The U.S. dollar fell and commodity currencies gained on Monday, as risk appetite increased on optimism about recovery from the coronavirus pandemic amid a blockbuster May U.S. jobs report last Friday.

The safe-haven Japanese yen rose against the dollar, reversing losses the past several days as risk sentiment gained with growing recovery hopes.

“There has been this unwinding of negativity since the last week of May, particularly negative U.S.-China bets,” said Erik Bregar, head of FX strategy, at Exchange Bank of Canada in Toronto.

Commodity currencies such as the Australian, New Zealand, and Canadian dollars were well-bid. The New Zealand dollar, for one, climbed to its highest in four months after New Zealand said it had stopped transmission of the coronavirus within the country.

New Zealand Prime Minister Jacinda Arden on Monday said the country would lift all virus-containment measures apart from border controls, making it one of the first countries to do so.

But as the United States and economies around the world reopen, there have been nagging doubts as to where the recovery is headed.

“The UK, for instance, plans to reopen and one of the things to consider is Brexit,” said Juan Perez, currency trader at Tempus Inc in Washington. “Once we establish that Brexit is one of those 2019 issues that needs to be resolved, we could see the major rally in the euro come under pressure because the market may focus once again on what type of partnership Europe would have with the UK,” he added.

In afternoon trading, the dollar index dipped 0.1% to 96.641 in choppy trading, after having gained overnight.
The dollar fell sharply against the yen, down 1.1% at 108.33 . It also dropped 0.6% against Swiss franc, another safe haven, to 0.9566.

The euro was higher against the dollar despite data showing German industrial output plunged the most on record in April as the pandemic forced companies in Europe’s largest economy to scale back production.

The euro was last up 0.2% at $1.1303. It reached a three-month high of $1.1384 last week after the European Central Bank announced it was expanding its stimulus program.

The New Zealand dollar rose 0.8% versus the greenback to US$0.6560, earlier hitting a high of US$0.6564, its strongest since late January. The Australian dollar also rose 0.7% to US$0.7017, with the Canadian dollar also rising, trading 0.4% higher at C$1.3366 per U.S. dollar.

Investors are now focused on the U.S. Federal Reserve policy meeting this week. The Fed will need to balance signs that economic fallout from the pandemic is past its worst against evidence the virus itself is not yet under control.

The U.S. dollar fell against the Antipodean currencies and the British pound after surprising improvement in U.S. labor market data bolstered expectations for economic recovery, which reduced safe-harbor demand for the greenback.

The Australian and New Zealand dollars both rose to their strongest since January after data showed a smaller-than-expected fall in Chinese exports, which supports commodity currencies.

In contrast, the U.S. dollar traded near its highest in more than two months against the yen, supported by recent gains in long-term Treasury yields as investors await the outcome of a two-day U.S. Federal Reserve meeting ending on Wednesday.

Sentiment has improved dramatically in the currency market as traders focus on signs of a rebound from the coronavirus outbreak as economies reopen from lockdowns, which has hurt the dollar and driven money into so-called risk-on trades.

“Commodities and emerging market currencies are clearly finding it easier to rise against the dollar on hopes of economic recovery, but it is a different story when it comes to the yen,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.

“For dollar/yen the focus is more on yields, which is pushing the currency pair higher.”

Japan’s economy shrank less than initially estimated in the first quarter due to the coronavirus outbreak, revised data showed earlier on Monday, but the yen took the data in its stride.

The Australian dollar traded at $0.6971, approaching its firmest since Jan. 2.

The New Zealand dollar rose to $0.6537, the highest since Jan. 29.

New Zealand has no active cases of Covid-19 in the country for the first time since Feb. 28, the health ministry said in a statement on Monday.

New Zealand will announce later on Monday whether it will remove all remaining social distancing and economic restrictions, barring border controls.

Against the pound, the dollar fell 0.25% to $1.2705 in Asia on Monday, close to its lowest since March 12.

The dollar traded at 109.49 yen, close to a two-month high set on Friday.

Underpinning the dollar was a surprising recovery in U.S. employment in May after the economy suffered record job losses in April, data showed on Friday.

The jobless rate also fell to 13.3% last month from a post-World War Two high of 14.7% in April, offering hope that the world’s largest economy is starting to stabilize after the pandemic triggered a wave of job cuts.

Some investors may avoid making big trades before the Federal Reserve meeting ending on Wednesday to see how Chairman Jerome Powell views a recent rise in 10-year Treasury yields and a steepening in the yield curve.

The onshore yuan was little changed at 7.0863 per dollar after exports from China, the world’s second-largest economy, fell less in May than the market expected, data showed on Sunday.

The pandemic first emerged in China late last year and has caused a sharp contraction in global economic activity, but many traders are now focused on the pace of recovery in the second half of this year.

Some analysts said there are still many risks to the outlook, including diplomatic tension between the United States and China, and the U.S. presidential election later this year.

Net short U.S. dollar positioning fell to $8.17 billion in the week ended June 2 from $8.6 billion the previous week, according to U.S. Commodity Futures Trading Commission data released on Friday, which may discourage some investors from selling the dollar further.

The euro traded at $1.1296 in Asia on Monday. The common currency is riding a wave of optimism after the European Central Bank said last week it will increase bond purchases to help the bloc’s weakest economies.

Sentiment will face a test later on Monday with the release of data forecast to show that German industrial output fell the most on record in April.