The U.S. Dollar Rebounds and Steadies
The U.S. dollar has steadied in the market on Wednesday as investors recoil with the continuous rise in the number of coronavirus cases. Its decline and gains in riskier currencies halted as greenback funding tightened.
FX markets consolidated as the huge U.S. stimulus package supported Asian stock markets; however, gains in riskier currencies were tempered.
The most sought-after U.S. currency was now steady against the euro at $1.0789. Previously it pulled back from its recent peaks now falling only marginally against the yen to 111.11 yen per dollar. The pound was steady at $1.1759 while the Australian dollar was 0.2% weaker at $0.5941.
Prior to steadying, the U.S. dollar index slid 0.55% to 101.690. Moreover, the USD/JPY pair was down 0.26% to 110.92 with the postponement of the Tokyo 2020 Olympics to next year. The AUD/USD pair gained 0.32% to 0.576 while the NZD/USD pair gained 0.15% to 0.5835.
In more forex news, the USD/CNY pair gained 0.11% to 7.0686 while the GBP/USD pair gained 0.4% to 1.1804.
The U.S. Dollar Unlikely to Stay Steady for Long
“It’s a nice rebound, we can probably run with it through the Asian session,” said Westpac FX Analyst Sean Callow. “But whether this mood can hold 24 hours from now, I’m not convinced”, he added. Callow said the overall virus picture is still very grim and almost certainly going to get worse.
The U.S. Federal Reserve offered unlimited bond-buying, in addition to opening discount dollar funding lines to central banks worldwide. This has supported risk sentiment with hopes for a huge U.S. fiscal stimulus package. The greenback remained a safe haven for investors as the number of COVID-19 cases rise.
Fresh COVID-19 cases include reports that Spain had the sharpest increase in cases overnight. Furthermore, India has announced a 21-day lockdown of its 1.3 billion population. The WHO reported that New York could become the next epicenter of the coronavirus pandemic.
Signs of stress remain within funding markets with the enormous demand for the safe-haven U.S. dollar in Forex. Chris Weston, head of research at Melbourne brokerage Pepperstone said, people still feel that the downside risk is more prevalent. There’s a lot of reasons to believe that we’re not out of the woods yet, he added.
Meanwhile, the NZD fell 0.5% to $0.5800 and the Korean won lost 3% of its Tuesday’s gain.
