Dollar falls as investor sentiment recovers despite
virus surge
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[July 14, 2020] By
Tommy Wilkes
LONDON - The U.S. dollar gave up early
gains on Tuesday with currency traders unfazed by diplomatic tensions
between the United States and China and rising coronavirus cases.
While stock markets initially fell as investors turned cautious, the
safe-haven yen and the Swiss franc were both down on the day by 1105 GMT
as market sentiment improved.
A resurgence of novel coronavirus infections has caused some areas to
place new restrictions on business activity, injecting some caution into
the multi-month stock market rally that is betting on a rapid economic
recovery.
Markets now face an additional threat from tit-for-tat retaliation
between Washington and Beijing over access to U.S. financial markets,
civil liberties in Hong Kong and territorial claims in the South China
Sea.
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ING analysts said that while the nervousness was supporting the dollar,
progress in the European Union's efforts to agree a recovery fund
package this week would boost the euro.
Against a basket of currencies the dollar index was last down 0.1% at
96.452, keeping it firmly with a tight range it has traded in since May.
(Graphic: U.S. dollar index,
https://fingfx.thomsonreuters.com/
gfx/mkt/yxmpjldygpr/us%20dollar%20index.PNG)
The euro recovered and rose 0.2% against the dollar to $1.1369 <EUR=EBS>.
The single currency's rise came despite a widely-watched indicator
showing investor sentiment in the euro zone's biggest economy, Germany,
worsened somewhat in July.
Traders are now waiting for U.S. inflation numbers for June due at 1230
GMT.
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![](../images/071420PICS/busine37.jpg)
A trader shows U.S. dollar notes at a currency exchange booth in
Peshawar, Pakistan December 3, 2018. REUTERS/Fayaz Aziz
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Scotiabank analysts said in a research note that currencies were now less
correlated with equity market trends, which could mean they return to being
driven by macroeconomic developments.
"If so, we think that this should support further gains in the euro and related
currencies given that Europe appears to have managed and contained the COVID-19
outbreak more effectively than the US, for example, implying better economic
prospects and more attractive investment returns," they said.
Currencies heavily exposed to global trade sentiment rebounded as the day wore
on. The Australian dollar rose 0.3% to $0.6957 <AUD=D3>, although China's
offshore yuan slipped slightly to 7.0184 yuan per dollar <CNH=EBS>.
The yuan was little moved by data showing Chinese imports in June rose for the
first time since the coronavirus panic paralysed the economy, as investors
focused on tensions with Washington.
The Japanese yen dipped, with the dollar up 0.1% at 107.41 yen <JPY=EBS>.
The British pound fell after the economy rebounded in May at a much
slower-than-expected pace, calling into question forecasts for a V-shaped
recovery. Sterling was last down 0.3% at $1.2520 <GBP=D3> and 0.5% against the
euro at 90.79 pence <EURGBP=D3>.
(Editing by Mark Potter, William Maclean)
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