The euro edged up by 0.25% to $1.1329 on Monday, maintaining its slow climb since late last month. Meanwhile, the British pound soared by 0.3% to $1.2656, edging near its three-week high of $1.2668 touched last week.
Riskier currencies gained as well. The Chinese yuan grew by 0.15% to 6.9987 per dollar in early trade, while the Australian dollar rose by 0.3% to $0.6969.
On the other hand, the U.S. dollar tumbled down in Asia on Monday. The dollar index dropped by 0.2% to 96.452 against a basket of major currencies in early trade. U.S. Covid-19 cases rose over the weekend, with Florida announcing more than 15,000 new cases in the last 24 hours.
Traders were also waiting for economic data from around the world along with U.S. corporate earnings. They were trying to gauge whether the markets’ guarded optimism on the economic outlook is justified. Meanwhile, the greenback had ended its third week of losses on Friday, as investors bought into risk-sensitive currencies on bets that the worst of the pandemic’s impact was over.
What do the experts say?
Rising coronavirus cases are not positive – stated Yukio Ishizuki, the senior currency strategist at Daiwa Securities. However, FX markets seem to think that there is still time before an overflow of the medical system will force them to put restrictions on the economy.
Traders think that the development of drugs and vaccines will help with a fast rebound from the pandemic. Such hopes are also supporting risk sentiment along with economic indicators that have so far shown recovery from lockdowns.
Markets had seen a rapid rebound after a rapid decline in various economic data – noted Masafumi Yamamoto, the chief currency strategist at Mizuho Securities. But looking ahead, the improvement could slow or even deteriorate, given the second round of infections.
A weekly gauge of consumer confidence has dropped in Australia, after a spike in infections in Melbourne. In the United States, where the magnitude of the outbreak is much larger, the consequences are the same.
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