The U.S. dollar declined on Tuesday due to new financial data from China, which proved much better than investors expected. It seems the country is rebounding rapidly after the coronavirus pandemic passed its peak in China.
The country’s March exports decreased by 6.6% from a year earlier, while the forecast was a 14% drop. Meanwhile, imports fell by less than 1%, and economists anticipated a 9.5% drop. However, the demand for the dollar weakened as traders’ fears abated.
Lee Hardman, the currency analyst at MUFG, noted that the Fed’s aggressive policy response combined with the ongoing improvement in global investor risk sentiment in the near-term is beginning to weigh down more on the U.S. dollar.
The states are planning to re-open their economies. This leaves traders to abandon the safety net of the most liquid currency, the U.S. dollar, and turn to more risky currencies. As a result, the euro climbed higher by 0.2% to $1.0932.
The Pound also surged forward, reaching $1.2575, its highest point since March 13. The currency was up by 0.5% at last. The Sterling had been closely linked to the performance of the equity market during the previous weeks.
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What about the Aussie and the Japanese Yen?
The Australian dollar soared by 0.5%, hitting a more than one-month high of 0.6432 per U.S. dollar. On the other hand, the Japanese yen rose by 0.1% against the greenback to 107.69 yen.
Mark McCormick, the global head of foreign exchange strategy at TD Securities, noted that traders don’t expect the current dynamic to last much longer. After this phase of the crisis finishes, the market will have to deal with the underlying data and the uncertainty of the pandemic exit strategies.
The mood was preempted in the forex markets by leveraged funds last week. Its’ net short U.S. dollar positioning in the previous week touched its highest level since May 2018. This is according to the data released by the U.S. Commodity Futures Trading Commission on Friday.