Mon, January 30, 2023

The U.S. dollar gained on Tuesday. What about the Euro?

The U.S. dollar gained on Tuesday. What about the Euro?

The U.S. dollar rose by 0.16% to 97.189 against a basket of currencies on Tuesday. The World Health Organization reported a record surge in global novel coronavirus cases on Sunday. There were spikes in infections in western and southern U.S. states, as well as in Brazil. After such dire news, demand for safe-havens increased again.

However, the safe-haven yen changed insignificantly on Tuesday, staying at 106.96 yen per dollar. Traders supported riskier currencies over the last few days, and the U.S. dollar had weakened. Markets hoped for economic recovery from the pandemic despite rising infections in several regions of the world.

After several big cities in the United States, among them New York and Toronto, reopened their economies, traders bought into riskier bets even though that came against setbacks elsewhere in the fight to contain the pandemic.

However, the pessimistic sentiment was stronger on Tuesday. The euro also lowered a tad, to $1.1252. Traders were waiting for European business activity surveys due on Tuesday.

What about the Chinese Yuan and the Australian dollar?

The Chinese yuan tumbled down by 0.35% to 7.0815 per dollar in offshore trading on Tuesday. The Aussie and other risk-sensitive currencies also fell after Peter Navarro, White House trade adviser, declared that the trade deal with China is “over.”

The Australian dollar plummeted down by 0.5% to $0.6874, losing earlier gains. At the same time, the New Zealand dollar fell by 0.65% to $0.6440.

Navarro connected the breakdown in part to Washington’s anger over China not sounding the alarm earlier about the virus outbreak. His comments renewed fears that the already tense relations between the United States and China may worsen and disrupt capital flows, as well as supply chains.

According to Daisuke Uno, chief strategist at Sumitomo Mitsui Bank, it’s not clear precisely what it is over. But Tuesday’s market reaction suggests that after riding on optimism of the economy, markets are prepared to test the pessimistic side of the story.

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