The U.S. dollar gained on Monday, while commodity currencies collapsed as a risk-off sentiment dominated Forex markets. It was partly caused by fears of a second wave of coronavirus infections after new cases were recorded in Beijing. U.S. numbers also rose over the weekend.
On Monday, Beijing announced its second consecutive day of record numbers of new infections. More than 25,000 new cases were reported in the United States on Saturday alone.
As investors turned to safe-haven currencies, the U.S. dollar surged forward overnight against a basket of currencies. But it steadied in early London trading and was up by 0.2% by the end.
However, the safe-haven Japanese yen did not strengthen significantly against the dollar despite the risk-off mood. It last traded at 107.28. The Swiss franc was also relatively weak versus the euro at 1.0723.
What about the Australian and New Zealand dollars?
The Australian dollar plummeted down by nearly 1% versus the dollar. The New Zealand dollar lowered by 0.7% as well. Both of them hit their weakest levels in more than a week.
Lots of analysts attributed the greenback’s strengthening to fears of a second wave of the virus. However, Ulrich Leuchtmann, from Commerzbank, stated that there had long been stories of new infections. Other safe-haven currencies did not strengthen. That fact suggests that the dollar’s gain is more a product of its recent weakening, according to Leuchtmann.
Furthermore, Industrial output in China increased for a second consecutive month in May. Despite that, the rise was smaller than expected. It seems the world’s second-biggest economy is struggling to get back on track after containing the virus.
The euro declined by 0.2% against the dollar, at $1.1232. On Monday, European countries eased some border controls following pandemic lockdowns. That move could help salvage part of the summer season for Europe’s travel and tourism industry.
The Norwegian crown hit a 4-week low against the euro as oil prices fell. The Bank of England, Swiss National Bank, and Norges Bank plan to hold meetings on Thursday. But they will probably keep their main policy rates unchanged.
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