The sterling was steady at $1.3069 per dollar on Tuesday. However, the Asian currencies fluctuated. The Chinese yuan tumbled down to 6.9814 as Sino-U.S. tensions continue rising. On the other hand, the Australian dollar rallied, though it was still 0.1% lower at $0.7117. The New Zealand dollar edged up to $0.6616 as well.
The U.S. dollar remained weak on Tuesday. Sentiment wavered between encouraging economic data and slow progress toward a U.S. government spending package. But traders preferred to stay cautious.
As a result, the dollar plummeted down on Tuesday. It traded at 93.574 against the basket of currencies and at $1.1755 versus the euro.
On Monday, the greenback jumped as high as $1.1695 per euro. That is 1.8% above last week’s two-year low. The dollar had its worst month in a decade in July, before it started rebounding in August. But the recovery hasn’t lasted long.
On the other hand, the Japanese yen soared against the U.S. currency, trading at 106.08 per dollar. According to ANZ Bank’s analysts, it’s not clear if the greenback is making a proper come-back or if this is just a correction. Strong equity markets and better manufacturing are decent supports, but the Covid-19 cases continue surging.
Coronavirus still poses a serious danger to economic recovery
The recovery cannot accelerate with the virus still not under control in large segments of the global economy – stated Alan Ruskin, Deutsche Bank’s chief international strategist.
On Monday, top Democrats in Congress and White House negotiators declared that they had made headway in talks on the latest Covid-19 relief bill. However, Chicago Fed President Charles Evans thinks that the next help for the U.S. economy must come from fiscal policy.
Meanwhile, virus cases are soaring again in Europe. Australia’s second-biggest city of Melbourne also announced a curfew and new restrictions on movement.
Traders may become more concerned – noted Chris Weston, the head of research at Melbourne broker Pepperstone. However, the support needed now is not more easing of monetary, but fiscal policy. According to him, the Aussie likely won’t fall below $0.7085.