Forex – Dollar Unloved; Mood Remains Optimistic

© Reuters.

By Peter Nurse – The dollar has few friends in early European trade Tuesday, as the tone remains generally optimistic about the global recovery despite heightened concerns over U.S.-China tensions and civic unrest in many U.S. cities.

At 3:25 AM ET (0725 GMT), the , which tracks the greenback against a basket of six other currencies, stood at 97.793, largely flat on the day, having earlier fallen as low as 97.73, its lowest level since mid-March. rose 0.2% to 107.77.

Earlier Tuesday, Australia’s central bank kept its interest rate and yield objectives unchanged amid early signs of a recovery. 

“It is possible that the depth of the downturn will be less than earlier expected,” Reserve Bank of Australia Governor Philip Lowe said in a statement.

The Australian dollar, often seen as a proxy bet on the strength of the Chinese economy, rose 0.1% to fetch $0.6802, having reached its highest levels since late January.

This follows U.S. easing off an 11-year low in May, feeding into the narrative of an economy turning upwards. 

This has overshadowed continued violent protests in many U.S. cities over alleged police brutality as well as renewed hostility between China and the U.S. over China’s treatment of Hong Kong’s special status.

“There are some potential flash points such as U.S. demonstrations and China-U.S. tensions. But, on the whole, the market is still moderately risk-on,” said Kyosuke Suzuki, director of forex at Societe Generale (OTC:).

The euro has retained its recent strength Tuesday, having been boosted by last week’s EU stimulus package, and ahead of Thursday’s meeting of the European Central Bank, where it is widely expected to raise its asset buying by around 500 billion euros to 1.25 trillion. It’s also being supported by reports of another German government stimulus package, due to be debated later Tuesday by Chancellor Angela Merkel’s cabinet.

The fetched $1.1126, little changed so far on Tuesday but holding near a 2-1/2-month high of $1.1154 touched on Monday.

traded at $1.2532, having already hit a one-month high of $1.2554, as the U.K. loosens months-long lockdown measures, while another round of Brexit talks get underway on Tuesday.

“EU demands of so-called ‘level playing field conditions’ remain the major hurdle,” said analysts at Danske Bank, “and we continue to expect no breakthrough ahead of the important deadline on 1 July, when the UK and EU need to decide on whether to extend the transition period.”


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Source: Forex – Dollar Unloved; Mood Remains Optimistic

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