U.S. dollar declined while riskier currencies hit high

The U.S. dollar plummeted on Thursday, while riskier currencies held gains. Traders shrugged off negative forecasts and rising Sino-U.S. tensions, hopeful about a fast recovery from the COVID-19 pandemic.

The risk-sensitive Australian dollar managed to break free from two months of rangebound moves in bullish overnight trading. The Aussie hit a ten-week high of $0.6616. The New Zealand dollar also skyrocketed, hitting a ten-day top of $0.6157. Both currencies seemed poised for further gains.

Imre Speizer, Westpac FX analyst, thinks that they might keep going for the time being. He noted that it’s one big rally, which hasn’t yet finished. The trend is obviously still upward for equities. Currencies are mostly following it, even if not as strongly.

The Australian dollar has jumped up about 20% after the S&P 500 index surged forward by 35% from its March lows. However, the Aussie and the Kiwi were lower in morning trade on Thursday as markets await a speech from Australia’s central bank chief.

Meanwhile, Japan’s flash purchasing managers’ index showed manufacturing activity tumbling down again in May. Traders expect more stimulus from the U.S. Federal Reserve, which boosts the stocks higher. ANZ analysts noted that almost everywhere, policymakers continue to stress that whatever resources are required will be made available.

What about the Euro?

The euro rallied to its highest point in three weeks, while emerging market currencies surged. The Swiss franc and Chinese Yuan also reached their highest peaks over two and one weeks, respectively. The euro last traded at $1.0975 in Asia, while the dollar edged higher against the Japanese yen to 107.68.

The Chinese yuan remained steady at 7.1067 in offshore trade, despite the diplomatic tensions between China and Australia. The United States also took fresh aim at Beijing’s handling of coronavirus on Wednesday, but it hasn’t dampened optimistic sentiment.

On the other hand, the British pound is still under pressure due to the inflation data that caused more speculation about the Bank of England cutting interest rates below zero.