U.S. Dollar Lowered Against Safe-Haven Currencies

The U.S. dollar declined again after the short rebound on Tuesday, caused by the coronavirus concerns. It lowered versus other safe-haven currencies, such as the Japanese yen and Swiss franc on Wednesday.

The stocks and currencies collapsed on Monday after the pandemic fear spread. However, the investors and traders hoped that the governments would take some measures to help the futures recover. Such assumptions, as well as the U.S. president’s statement, was the reason for the dollar’s sudden rally.

However, U.S. equity futures and U.S. bond yields fell in early trade in Asia on Wednesday, with most investors still on the sidelines even after risk assets rebounded more or less on Tuesday. Several currencies collapsed as well.

The dollar dropped against the yen, losing 0.6% to 104.98 yen, down almost a full yen from Tuesday’s high. The Swiss franc, on the other hand, gained 0.25% to 0.9369 francs per dollar. The euro was stable at $1.1304, up 0.21% so far in Asia.

Yukio Ishizuki, the senior strategist at Daiwa Securities, stated that liquidity is very thin presently. There are very few orders in the market, and most of them appear to come from algorithm players. He thinks that trade will remain volatile for the time being.

What Caused the Dollar’s Sharp Downfall Today?

The currency had rallied on Tuesday as traders thought global monetary policymakers would launch further stimulus plans aimed at bolstering economies hit by trade and travel disruptions.

Furthermore, Trump said that he would ask Congress for a payroll tax cut, as well as other “very major” stimulus moves. However, the details remain unclear, and investors decided to play it safe.

Shinji Ishimaru, the senior currency analyst at MUFG Bank, stated that it’s too early to say if the market sentiment has turned positive. According to him, yesterday’s rebound in the U.S. currency and risk assets is a type of a rebound which often happens in a downtrend.

A lot depends on the U.S.’s ability to contain the infection and keep the economy going. However, this ability is still uncertain.