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The
dollar index advanced 0.1% to 97.35 <.DXY> but remained below a
2020 high of near 103 in late March.
"As U.S. infections rise again, markets are re-assessing the
chances of a rapid return to 'normal' economic activity. If we
have to learn to live with and control a virus for some time,
rapid recoveries in PMIs and labour markets will stall at a
lower level of activity," said Kit Juckes, macro strategist at
Societe Generale, referring to Purchasing Managers' Index
surveys.
"That is holding us back from calling a significant reversal in
the dollar's fortunes this year," Juckes said.
The euro retreated 0.3% to $1.1222 <EUR=EBS>, disregarding a
fall in France's jobless total in May after it reached record
levels the previous month.
The Japanese yen fell 0.2% to 107.21.
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 <CAD=D4> weakened to a 10-day low of $1.3666
after it became the first country to lose its AAA rating as a
result of coronavirus-fuelled government spending, before
recovering to trade 0.1% up on the day.
"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.
Elsewhere, Scandinavian currencies rose against both the U.S.
dollar and the euro, with the Swedish crown up 0.5% against the
euro <EURSEK=D3>.
Traders will be watching U.S. durable goods and initial jobless
claims data at 1230 GMT. Both are projected to come in weaker
than the previous readings, according to economists polled by
Reuters.
(Reporting Julien Ponthus in London and Hideyuki Sano in Tokyp;
editing by Saikat Chatterjee, Larry King, Kirsten Donovan)
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