The U.S. currency struggled on Friday. The dollar’s index fell by 0.1% at 99.758 against a basket of six other major currencies.
According to Ebrahim Rahbari, the chief G10 FX strategist at Citi, the possibility of negative interest rates is slightly bearish for the dollar, given limited market pricing to date, as well as ongoing concerns about the U.S. “debasing” the greenback.
However, an aggressive U.S. stimulus would probably boost the recovery in the United States and pull in capital flows, supporting the currency as well. It climbed up by 0.1% to 106.35 against the Japanese yen, above the seven-week low of 105.985 touched on Wednesday.
Meanwhile, the euro rebounded, rising by 0.1% at $1.0839 on Friday. Despite that, the euro is still down more than 1% over the week. Traders are concerned about a German court ruling that could jeopardize the ECB’s bond-buying scheme. The sterling also gained in thin trading, rising by 0.1% to $1.2376.
Currencies linked to global trade gained today as well. News about U.S. and Chinese negotiators agreeing to strengthen cooperation over a trade deal boosted their respective currencies. Furthermore, more governments are reopening their economies, and it seems investors’ risk appetite is growing accordingly.
Traders mostly ignored speculation about upcoming U.S. unemployment data that will probably show the American economy losing more jobs than at any other time since the Great Depression.
What about the Chinese Yuan and the Aussie?
U.S. and Chinese trade representatives discussed the phase one trade deal on Friday. China agreed to improve the atmosphere for its implementation, while the United States declared that both sides expect obligations to be met. As a result, China’s offshore yuan increased by 0.1% to 7.087 yuan per dollar.
The Australian dollar gained 0.3% to $0.6514 after hitting a one-week high earlier. It soared after authorities announced they would ease social distancing restrictions in a three-step process. They aim to remove all curbs by July.
Despite that, some analysts are nervous about the Aussie. Thu Lan Nguyen, the Commerzbank analyst, noted that it’s unclear how deep “the collapse of the economy” in Australia is or when the will country recover.