The U.S. dollar declined on Thursday after oil prices jumped by 10% and boosted commodity-linked currencies. However, the greenback still remained strong against the other major currencies thanks to its safe-haven status.
The traders hoped that U.S. diplomacy would succeed in persuading top exporters Russia and Saudi Arabia to end a price war that has driven the crude oil market to its lowest levels in nearly two decades.
As a result, the oil prices soared, and commodity-linked currencies also skyrocketed. The Australian dollar gained 0.6% to $0.6110, while the Canadian dollar rose by 0.65% to $1.4146.
However, investors are still concerned by the massive disruption to global trade caused by the pandemic, standing firmly by their decision to own dollars in cash.
The dollar index stood flat at 99.470 against a basket of six major currencies on Thursday, after a 0.53% gain overnight. On the other hand, the euro slid by 0.1% to $1.0947, following a 0.69% fall on Wednesday.
The safe-haven Japanese yen also eased slightly. It last traded at 107.24 yen per dollar after hitting a two-week high of 106.925 on Wednesday.
The traders’ concern increased after U.S. President Donald Trump issued a warning late Tuesday that Americans faced a “painful” two weeks in fighting the coronavirus.
Shin-ichiro Kadota, the senior strategist at Barclays, stated that a deterioration in the U.S. economic outlook would probably lead to the yen strengthing against the U.S. dollar.
What about the Asian currencies?
It seems the pandemic is dying down in China. Several other countries also showed signs of recovery. However, the virus is still raging in many other countries.
The Indonesian rupiah fell by 0.5% to edge near to a 22-year low late last month. The rupiah has dropped by 17% since the fears regarding the virus started to hit markets in late February.
The Brazilian real has lost 16% since late February, while the South African rand has tumbled by 17% and the lira has fallen by 9%.