The euro held on to its gains against the dollar and the pound on Tuesday. This is while traders awaited data on German investor sentiment. They were trying to better gauge the pace of Europe’s recovery from the pandemic crisis.
The euro stood at $1.1346, and it traded at 90.36 pence against the pound. Thus, it held onto a 0.9% gain from the previous session.
Meanwhile, the U.S. dollar moved into narrow ranges against most currencies on Tuesday. Concerns about diplomatic tensions between the United States and China renewed. Surging coronavirus cases also dampened risk appetite.
As a result, currency trading has been subdued on Tuesday. A recent resurgence of new coronavirus infections has caused some countries to place new restrictions on business activity. Markets also face a threat from the retaliation between Washington and Beijing over civil liberties in Hong Kong, territorial claims in the South China Sea, and access to U.S. financial markets.
On Tuesday, the greenback traded at 107.35 yen in Asia, following a 0.4% gain in the previous session. The U.S. currency traded at 0.9419 against the Swiss franc.
What about the Australian dollar?
The Aussie changed insignificantly at $0.6935. Negative sentiment caused it to lower, as some Australian states also re-impose coronavirus restrictions. Meanwhile, the New Zealand dollar also dropped to $0.6530.
The focus has shifted to whether or not the next round of pandemic lockdowns will be large enough to damage economic growth – noted Junichi Ishikawa, the senior foreign-exchange strategist at IG Securities.
Besides, the Hong Kong problem could potentially lead to new trade friction. Negative developments on either front could cause stocks to decline, thus driving some safe-haven flows to the dollar and the yen.
According to the senior State Department official, President Donald Trump’s administration wants to scrap a 2013 agreement between the U.S. and Chinese auditing authorities. The United States and China are currently waging diplomatic battles on several fronts.
The United States has already hardened its stance against China’s claims in the South China Sea. Furthermore, it is taking steps to end Hong Kong’s special legal status in protest against Beijing’s security law for the former British colony.
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