The U.S. dollar nursed losses on Tuesday, while riskier currencies added a little to their gains. Better-than-expected U.S. services boosted traders’ confidence in a global economic recovery from the coronavirus pandemic.
The greenback hovered near a two-week low against a basket of currencies. Meanwhile, the Chinese yuan surged forward and briefly broke past the 7 per dollar barrier. The Antipodean currencies soared as well.
The rally began after a front-page editorial in the China Securities Journal, affiliated with state-run Xinhua, announced that fundamentals laid the foundation for a healthy bull market.
Furthermore, new Data showed that U.S. service industry activity recovered to almost pre-pandemic levels last month. The headline figure of 57.1 was well ahead of expectations around 50.2.
Imre Speizer, the FX analyst at Westpac in Auckland, stated that economies are back to something that looks like a V-shape again. The U.S. dollar will do down if the sentiment is strong because it’s a safe haven.
What about the Aussie and the Kiwi?
The New Zealand dollar increased by 0.3% to a one-month high of $0.6580. According to Speizer, it could reach $0.67 if sentiment holds. Meanwhile, the Australian dollar was steady at $0.6976.
Both currencies are making a renewed tilt at the top of the range, which they have held for weeks. However, Terence Wu, a strategist at Singapore’s OCBC Bank, noted that the worst is probably over, but a swift recovery cannot be taken as the base case.
Riskier currencies continue to rally so far, but coronavirus is still spreading rapidly, casting doubts over the global recovery.
Florida’s greater Miami area halted its reopening, ordering all restaurant dining to cease on Monday as coronavirus cases rose nationwide by tens of thousands. The U.S. death toll has already topped 130,000.
Australia also plans to shut the border between its two most populous states at midnight on Tuesday, attempting to contain a coronavirus outbreak in the city of Melbourne.