Riskier currencies rallied on Tuesday despite the surging coronavirus cases. Rapidly spreading infection is casting doubts over the global recovery. Still, the New Zealand dollar skyrocketed by 0.3% to a one-month high of $0.6580. Imre Speizer, the FX analyst at Westpac in Auckland, noting that it could reach $0.67 if sentiment holds. On the other hand, the Australian dollar traded steady at $0.6976.
The Aussie and the Kiwi are making a renewed tilt at the top of the ranges they have held for weeks. The worst is probably over, but a swift recovery cannot be taken as the base case – stated Terence Wu, a strategist at Singapore’s OCBC Bank.
However, Australia resolved to shut the border between its two most populous states at midnight on Tuesday, attempting to contain a Covid-19 outbreak in the city of Melbourne.
How is the U.S. dollar faring?
The U.S. dollar lowered on Tuesday as riskier currencies gained. Traders turned from safe-havens due to the better-than-expected U.S. services data. This boosted confidence in a global economic recovery from the coronavirus pandemic. Against a basket of currencies, the greenback traded near a two-week low.
According to new data, U.S. service industry activity rebounded to almost pre-pandemic levels last month. The headline figure of 57.1 surpassed the expectations of approximately 50.2.
Speizer noted that economies are back to something that looks like a V-shape again. The dollar tends to go down if the sentiment is strong because it’s a safe-haven.
Still, coronavirus poses a danger for bolstering the economy. Florida’s greater Miami area stopped its reopening, ordering all restaurant dining closed on Monday as Covid-19 cases increased nationwide by the tens of thousands. The U.S. death toll has already surpassed 130,000.
Meanwhile, the Chinese yuan hit high, briefly breaking past the 7 per dollar barrier. A front-page editorial in the China Securities Journal, affiliated with state-run Xinhua, announced that fundamentals laid the foundation for a healthy bull market, causing the currency’s rally.