The U.S. dollar dropped from a three-week high on Friday. However, it still ended the week with a modest gain, since rising tensions between the U.S. and China and reports about the second wave of coronavirus infections worried investors. The greenback gained 0.5% against a basket of currencies during this week.
It seems the U.S. economy is in a grimmer state, than investors anticipated. Analysts forecast a 35% annualized second-quarter contraction. While they still expect some recovery in the second half of the year, the economy probably won’t be able to rebound fully in 2020.
Rodrigo Catril, the senior foreign exchange analyst at National Australia Bank, noted that the market is in a wait-and-see mode, waiting to see whether U.S.-China trade tensions escalate.
Amid increasingly bitter exchanges between U.S. and China, traders are questioning the future of a partial trade deal, which was signed in January. As a result, the Chinese yuan plummeted down to a one-week low overnight. Still, it managed to recover losses, steading at the end of the session.
It seems China’s manufacturing sector is rebounding quickly. Traders are watching the retail figures for signs of a return of consumer spending.
How did Asian and European currencies fare?
The risk-sensitive Australian dollar was steady in the morning trade, at $0.6464 on Friday. However, it tumbled down by 1% this week. This is the currency’s first weekly loss since early April. Concerns about the pandemic’s rebound caused the Aussie’s fall down.
On the other hand, the kiwi climbed up to $0.6008 from a Thursday three-week low of $0.5958. But most major currencies remained steady as larger economies started to ease lockdowns.
The Japanese yen traded at 107.40 per dollar. Japan lifted a state of emergency in large parts of the country on Thursday.
The British pound is under pressure, as it is at $1.2221. It tumbled down to a five-week low of $1.2161 overnight. The British government reiterated its refusal to extend the Brexit transition deadline beyond December, causing the currency’s decline.
The euro also collapsed, with an almost five-year low against the Swiss franc of 1.502 francs as the crisis put pressure on it. The currency last traded at $1.0840.