Mon, February 06, 2023

Riskier currencies rallied as the risk sentiment improved

Riskier currencies rallied as the risk sentiment improved

The euro briefly reached its highest point since mid-March, on Monday. Riskier currencies, such as the Australian dollar, skyrocketed as investors looked for more signs that the global economy may be through the worst part of the crisis caused by the pandemic.

Furthermore, U.S. President Donald Trump hasn’t tried to impose new tariffs on China during a news conference on Friday, despite his earlier comments, even though he outlined his response to Beijing’s tightening grip over Hong Kong. This further calmed traders, as they feared that the conflict would escalate quickly.

According to economic data, the downfall in manufacturing output had found a bottom in several countries. However, Chinese Caixin/Markit Purchasing Managers Index showed a marginal improvement in Chinese factory activity last month, which was quite unexpected.

The manufacturing PMI recovered slightly in the eurozone during May as well, but factory activity contracted heavily. So far, Japan and South have experienced the sharpest falls in activity in more than a decade.

The Australian dollar surged forward by 1.3%, to a four-month high of $0.6772. The Aussie has gained more than 20% since its March lows. It has been growing steadily through May. The New Zealand and Canadian dollars profited as well. And the Japanese yen edged higher, with the dollar lowering by 0.2% to 107.66 yen.

On the other hand, China’s offshore yuan lowered after it rallied on Friday, on hopes of a reduction of Sino-U.S. tensions.

How did the European currencies fare?

The euro also increased, graining 0.4% to $1.1154, before dropping back to trade flat at $1.1109. Some strategists expect more easing from the European Central Bank when it meets on Thursday. They advise buying the euro with a target of $1.155.

The other currencies are rising as well. However, their surge caused the U.S. dollar to plunge to its weakest point since March 16, before slightly rebounding. The dollar index traded down by 0.1% at 98.15 by the end, against a basket of currencies.

Meanwhile, the Sterling gained as much as 0.6%, soaring to a three-week high of $1.2425. Britain gradually moved out of lockdown, which helped to boost the pound.

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