U.S. dollar falls after recent rally. What caused drawback?

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Dollar and other main currencies

The U.S. dollar index, which tracks the greenback against a basket of other currencies, lowered by 0.1% to 99.727 on Friday.

The dollar rallied during the last weeks partly due to its safe-haven status. But also thanks to the recent data, which showed that the U.S. economy stays strong.

However, the recent statements about the coronavirus caused the currency to fall.

It seems the investors’ hope China would manage to contain the epidemy was a bit premature. World health officials warned recently the coronavirus could break out globally at any time. That statement caused the traders to worry.

Tedros Adhanom Ghebreyesus, World Health Organization Director-General, stated while the number of cases in the rest of the world is very small compared to China, which may not stay the same for long.

He also said they need to hammer the outbreak in any country while the window of opportunity is still open. Because it may close shortly.

Meanwhile, the National Association of Realtors is planning to report on January sales of existing residential buildings later on Friday.

Analysts think existing home sales will show a 1.8% downfall to an annual rate of 5.43 million last month.

Markit’s preliminary purchasing managers’ index (PMI) may also show a decline to 51.5, with the services PMI dropping down to 53.

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How do the other currencies fare? 

The GBP gained 0.1% to 1.2894 against the U.S. dollar due to the good U.K. retail sales data of a 0.9% increase in the last month.

However, Bank of America noted the U.K. government is unlikely to unveil a big increase in fiscal spending in the March 11 Budget. So they don’t expect a meaningful fiscal impulse near term.

The U.S. dollar dropped against the Japanese Yen by 0.1% to 111.96, as the yen strengthened due to the safe-haven demand.

However, Asian equities traded mostly lower on Friday. The AUD/USD pair and the NZD/USD pair both declined by 0.2%.

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