The U.S. dollar was steady on Monday after plunging to its lowest level since September 2018 overnight. Deteriorating U.S.-China relations weakened the greenback, along with domestic economic concerns as U.S. coronavirus infections showed no sign of slowing.
U.S. Secretary of State Mike Pompeo declared that Washington and its allies must use more creative and assertive ways if they want the Chinese Communist Party to change its ways.
The dollar index tumbled down overnight before steadying at 94.054, lower by 0.3%. Coronavirus infections show no signs of slowing in the U.S., and investors are doubtful of a fast economic recovery. Almost a quarter of the global total COVID-19 deaths have been in the United States. Here, unemployment claims unexpectedly surged last week.
Furthermore, some of the earlier steps to lessen the financial impact, among them enhanced jobless benefits, are due to expire this month. So far, Congress hasn’t agreed on fresh support.
Commerzbank analysts Ulrich Leuchtmann and Hao Zhou stated that in the past, the greenback was able to benefit from the U.S.-Chinese trade conflict. But it is no longer the case as what is at stake is no longer just trade.
They added that if the dominance of the U.S. currency in international trade and capital markets was to be reduced as a result, the dollar’s weakness at the moment would only be a very watered-down taste of things to come.
Meanwhile, Rabobank’s global strategist, Michael Every, noted that the index is skewed by major constituent pairs such as euro-dollar and dollar-yen.
How did other currencies fare?
Safe-haven currencies rallied against the dollar. The Swiss franc rose roughly by 0.2% at 0.91855, reaching a five-year high of 0.9167 overnight. The Japanese yen traded at a four-month high versus the greenback, at 105.575.
The euro also continued gaining after European Union leaders agreed on a 750 billion-euro fiscal stimulus plan last week. The currency hit a high of $1.17255 against the dollar overnight. However, it then dropped below $1.17 in early London trading.
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