SINGAPORE – The dollar found a footing on Wednesday as investors returned to safe-havens, reversing some risk currency gains made on hopes the coronavirus crisis in Europe and New York was slowing.
The greenback rose on most majors, a day after suffering its worst drop against a basket of currencies in nearly two weeks.
It was not enough to recoup the ground given in recent days, but came after a sour end to trade on Wall Street on Tuesday and as a two-day rally in Asia’s equity markets ran out of puff.
The largest gains came against the risk-sensitive Australian and New Zealand dollars, which each fell about 0.4%.
The Aussie has now been repelled twice in as many weeks from breaking past resistance at the 62-cent mark. It last stood at $0.6137 and the kiwi at $0.5962.
“It’s a two steps forward, one step back situation,” said Bank of Singapore currency analyst Moh Siong Sim.
“Optimism has been driven by the sense that perhaps the virus is turning for the better,” he said. “But markets are really concerned about the extent of the economic fallout which is just starting to show up in the numbers.”
The dollar, which for a month now has very closely tracked risk appetite as investors and businesses fearing the worst have rushed to the world’s reserve currency, edged up on the pound, euro, yen and Swiss franc.
It last stood 0.2% higher at $1.0871 per euro and the same margin higher against the pound at $1.2315, though remained well short of recovering falls made on Tuesday.
The greenback rose 0.2% on both the yen and franc to 108.93 yen and 0.9714 francs.
A Reuters tally shows 81,451 coronavirus-related deaths globally and nearly 1.4 million infections. British Prime Minister Boris Johnson, who is infected, remains in intensive care although his condition is stable.
Meanwhile, there are signs of a levelling off of hospitalisations in New York, and in Europe there are plans to begin easing some of the lockdowns as fatalities have been declining.
The Chinese city where the coronavirus epidemic first broke out, Wuhan, ended a two-month lockdown on Wednesday, although a northern town started restricting the movement of its residents amid concerns of a second wave of infections.
“What we see and hear from Wuhan will be quite important for whether any improvement in sentiment can be maintained,” said Ray Attrill, head of FX strategy at National Australia Bank.
“There is very keen interest in how willing Wuhan residents are to get out and about, and hope there won’t be evidence of re-infections any time soon.”
Mainland China’s new coronavirus cases have doubled in 24 hours and new asymptomatic infections more than quadrupled, while the economic cost of the pandemic becomes clearer.
Ratings agency S&P Global on Wednesday warned the cost of combating the virus would weigh heavily on Australia’s finances and changed the outlook for the country’s rating to negative.
Against a basket of currencies the dollar edged up 0.2% to 100.170 and it rose 0.3% against the Chinese yuan.
“While the virus’ curve is flattening, the economic effects of the corona crisis will linger for years,” said Commonwealth Bank of Australia currency analyst Joe Capurso.
“Economies will take time to re‑open, some businesses will not re-open, and unemployment will take years to (recover). We think that means the dollar and yen will re-strengthen.” – Reuters