The U.S. dollar fell by 0.7% against a basket of currencies on Wednesday, as the European shares rallied the second day in a row and risk sentiment improved across equity markets.
Furthermore, the greenback declined against the yen by 0.1% as Japanese Prime Minister Shinzo Abe issued a state of emergency on Tuesday to slow down the spread of coronavirus.
The U.S. currency fluctuated in recent weeks in volatile trading. But action by central banks to ease the demand for dollars has helped bring some calm to markets.
Meanwhile, commodities-exposed currencies hit high as oil skyrocketed on Tuesday. Traders hoped that oil producers would agree to cut output in the face of lowered demand due to the coronavirus pandemic.
The Australian dollar increased by 1.5%. The Reserve Bank of Australia has slashed interest rates and embarked on quantitative easing recently. The Norwegian crown and South African rand also soared, both rising more than 2% during the day. The Norwegian crown hit a fresh three-week high against the U.S. dollar, at 10.4612 crowns per dollar.
While these currencies rallied on Wednesday, they suffered significant losses recently as the investors moved on the U.S. dollar amidst the coronavirus crisis.
What about the Euro and the Sterling?
The euro increased by 0.8% on Tuesday, the last trading at $1.08835. The pound also skyrocketed, even though the traders awaited news about the British Prime Minister Boris Johnson. He is fighting coronavirus in intensive care.
The analysts are concerned about Jonson’s condition. But they think that the government’s policy direction to fight the virus won’t change. As a result, the sterling rose by 0.6% during the last session.
According to Kenneth Broux, the FX strategist at Societe Generale, there is a nice decline in volatility across forex and equity markets. He noted that central banks had done a superb job in alleviating the strain in dollar markets, and that’s showing.