U.S. dollar declined. What about other currencies?

The dollar lowered on Tuesday despite concerns about Sino-U.S. tensions. Growing optimism about a global recovery from the coronavirus pandemic supported riskier currencies, causing the greenback’s fall.

The U.S. currency was slightly softer against most Asian currencies. It changed insignificantly against a basket of currencies, trading at 99.692.

On the other hand, the British pound gained 0.3% to $1.2215, while the euro edged up by 0.2% to $1.0908. However, both of them lost between 4% and 5% on the Brazilian real and Mexican peso last week.

Chris Weston, head of research at Melbourne brokerage Pepperstone, noted that the Mexican peso and Brazilian real have the perfect opportunity for outperformance now.

What about Asian currencies?

The Australian and New Zealand dollars climbed up by 0.3%, but still remained below last week’s highs. On Tuesday, the Aussie was steady at $0.6559 along with the kiwi at $0.6112.

Even though ANZ Bank upgraded its forecasts for the Antipodean currencies, it still expects both to decline, with the Aussie forecast at $0.60 and the kiwi at $0.55 in December. According to ANZ analysts, at current levels, the global recovery is in the price. They believe it’s a question of when, not if, depreciation resumes.

Michael McCarthy, CMC Markets’ chief strategist, stated that markets are caught between two conflicting currents. Easing COVID-19 lockdown measures are fuelling growth optimism while rising tensions between China and the U.S. are boosting concerns.

The Chinese Yuan also strengthened a bit, at 7.1427, but it stays near the two-month low of 7.1465 hit on Friday. The Japanese yen traded 107.79 per dollar.

So far, the Yuan endures, but China’s move to impose laws on Hong Kong, along with its handling of the pandemic, are seen as potential catalysts for a further deterioration of already soured U.S.-China relations. Some analysts think that the Yuan may collapse again.

White House National Security Adviser, Robert O’Brien, warned about potential sanctions this weekend if Hong Kong’s autonomy was undermined. At the same time, China’s top diplomat, Wang Yi, criticised U.S. attacks as a “smear”. However, restrictions on businesses and movement are lifting around the globe, and there is hope for a swift return to growth.