News ID: 272118
Published: 0529 GMT July 28, 2020

Dollar sinks to two-year low on concern over US virus toll

Dollar sinks to two-year low on concern over US virus toll
DADO RUVIC/REUTERS

The dollar weakened to a two-year low as sharp increases in US coronavirus cases and flare-ups around the world weighed on investor confidence.

 

The dollar index, which measures the currency against a basket of peers, slipped 0.9 percent to its lowest level since May 2018, as the continuing spread of COVID-19 in the US threatens to dampen the economic recovery, ft.com reported.

The poor performance of the US currency — on track for its worst month since April 2011, according to Refinitiv — has supported a rally in gold prices to an all-time high. The precious metal rose as much as 2.4 percent to $1,945.16 per troy ounce.

“The thing that’s changed in the last few days is that it’s not just gold that has gone up against the dollar, but almost everything,” said Kit Juckes, foreign exchange strategist at Société Générale.

“That’s partly driven by a sense that the US is having a harder time controlling the virus than others, which will see the US economy underperform,” Juckes added.

The Japanese yen strengthened 0.8 percent to a four-month high of ¥106.18 per dollar. The pound rose as much as 0.7 percent to $1.2901 and the euro gained 0.9 percent to $1.1781, breaking above $1.17 for the first time since September 2018.

US equities were higher. The S&P 500 ended up 0.7 percent, having fallen in the previous two sessions, while the technology-heavy Nasdaq gained 1.7 percent ahead of earnings this week from Apple, Facebook and Google’s parent company Alphabet.

There were hopes some sort of stimulus extension could be hammered out as US Senate Republicans raced to complete details of a $1 trillion coronavirus aid proposal before enhanced unemployment benefits expire on Friday, Reuters wrote.

The proposal could involve a cut in benefits to $200 from $600, which would be a big blow to household incomes and spending power.

Aid is desperately needed given 30 million Americans are out of work and states are tightening social restrictions again, a trend that has also dragged on the US dollar.

Alan Ruskin, head of G10 strategy at Deutsche Bank, noted currencies had been tracking the relative performance of their economies, so that high-ranked economic performance was associated with stronger currencies.

"One clear pattern is how economies linked most tightly to China — including commodity producers as diverse as Australia, Chile and Brazil — have tended to perform better than economies most directly linked to the US, notably its NAFTA trading partners," said Ruskin.

 

   
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