The dollar traded into a narrow range on Friday. Safe-haven flows supported it as a resurgence of Covid-19 in the United States discouraged some traders from taking on excessive risk.
The US currency traded at $1.2395 against the euro on Friday in Asia. It also held steady at 0.9469 Swiss franc after three straight days of gains. The Sterling traded hands at $1.2471. Against the Japanese Yen, the greenback changed slightly to 107.50 yen.
Meanwhile, the Chinese yuan was stable in offshore trade as investors waited for data on China’s services sector. They may avoid taking big positions due to concerns about diplomatic tensions between Washington and Beijing over civil liberties in Hong Kong.
According to Thursday’s data, the US economy added more jobs than expected in June. Despite that, the reaction in the FX market has been quiet. This is while another rise in coronavirus infections threatens to put the breaks on economic activity. Several US states already halted plans to reopen businesses. Also, the authorities are taking steps to curtail activity during the extended Independence Day holiday weekend.
Junichi Ishikawa, the senior foreign-exchange strategist at IG Securities, stated that new infections in the United States have been on an uptrend since June. Currently, the market is leaning toward buying the greenback, particularly against emerging market currencies, as the dollar is considered the safest asset.
Even though trading was subdued in markets on Friday before the US holiday, analysts noted that sentiment favors more gains in the dollar as investors get cautious.
United States’ and China’s Relations are in focus
On Thursday, the US Senate unanimously approved legislation to penalize banks doing business with Chinese officials. Specifically for those who implement Beijing’s new national security law for Hong Kong. This raises the chances of further friction between the world’s two largest economies.
The yuan traded little changed at 7.0732 per dollar in the offshore market. Meanwhile, the Australian dollar was steady at $0.6917 on Friday. Analysts expect new data to show a sharp rebound in retail sales in May. The New Zealand dollar stood at $0.6509.