The European currencies fell against the U.S. dollar on Monday. The euro and the sterling lowered from 0.5% to 1% in London trading, ending the recent rallies that followed the Fed’s efforts to soften the demand on the dollar earlier this month.
The euro fell by 0.6% to $1.1069, while the sterling slid by 1% to $1.2318 before rebounding above $1.24. The U.S. currency index, on the other hand, rose as much as 0.7% to 98.992.
The dollar also increased against the offshore Chinese yuan by 0.4% to 7.1132. The yuan fell after the People’s Bank of China cut a key interbank interest rate by 20 basis points unexpectedly.
The Australian dollar declined sharply at the early trading. However, it managed to recover moderately to trade down 0.5% at $0.6141.
The U.S. dollar fell during the last week due to the several measures employed by central banks and governments, which strengthened the other currencies versus it for a short period.
However, the greenback jumped on Monday after the week of declines, rallying against the other major currencies. The authorities tightened lockdowns to fight the pandemic, and investors are bracing for a prolonged crisis.
What caused the currencies’ recent fall?
The concern about the coronavirus pandemic and the economic impact of lockdowns continues to dominate foreign exchange markets so far. Experts fear that the currencies may fall further. However, price moves were relatively well-contained on Monday and much smaller than in recent sessions.
The oil prices fell sharply yesterday. As a result, the oil-exposed Norwegian crown plummeted down, with the Canadian dollar also lowering.
After Moody’s cut South Africa’s credit rating, the rand collapsed to a record low. The safe-haven Japanese yen, on the other hand, rose marginally to 107.87 yen per dollar.
Standard Chartered analysts think that the greenback may become a barometer of the efficacy of the policy response to interbank funding challenges, corporate credit difficulties, etc. According to them, the breadth and magnitude of U.S. dollar gains suggest that financial markets have become severely impaired.
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