The dollar firmed on Monday, but it was still lower

The U.S. dollar strengthened slightly against a basket of currencies at 93.339 on Monday, trading just above a two-year trough. It also traded at 105.75 against the Japanese Yen, soaring above the recent low of 104.17. But the dollar faced stiff resistance at 106.46.

Even though the greenback tried to continue its rally, it struggled after trading so long in the red. Recent declines left the dollar vulnerable. In addition, the market was structurally short of dollars.

Washington imposed new sanctions on senior Hong Kong and Chinese officials. Despite that, trade talks are still scheduled for August 15. But investors are concerned about increasing Sino-U.S. tensions.

According to experts, if there is any breakdown in trade talks, the U.S. dollar and the safe-haven Swiss franc would benefit. But it will happen at the expense of the yen and commodity currencies such as the Aussie.

The dollar rallied during the last few days. On Friday, a better payroll report boosted Treasury yields higher into this week’s massive $112 billion debt sale. Even though the dollar edged up after that, it still wasn’t enough for the currency’s recovery. The greenback ended lower for the seventh week in a row.

How did the Euro fare?

The Euro rose to $1.1791 on Monday, after hitting a two-year high of $1.1915 last week. J.P.Morgan’s analysts noted that their portfolio had been positioned for the last few weeks for a narrowly weaker greenback due to the rise in coronavirus infections in the U.S. That surge in infections has opened up a big gap in near-term economic performance, especially against Europe.

Furthermore, traders are still uncertain whether U.S. policymakers will agree on a new fiscal support package for the economy. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi stated on Sunday that they were open to restarting COVID-19 aid talks.

Investors are also waiting for U.S. consumer price data on Wednesday, along with retail sales on Friday. According to the forecast, the later may show a solid bounce in spending. A raft of Chinese figures is due this week as well.