U.S. dollar soared on Friday. What caused its rebound?

The U.S. dollar rebounded on Friday while other major currencies lowered. President Donald Trump took some measures to ban transactions with the Chinese owners of two popular mobile apps.

On Thursday, Trump issued an executive order to ban transactions with ByteDance, the Chinese company owning the video-sharing app TikTok, and Tencent Holdings Ltd, owner of the WeChat messaging app.

That caused some turmoil in the markets. However, analysts expected the United States’ employment data to come in weaker, but it was much more upbeat then forecasted. As a result, the greenback strengthened considerably. 

Esther Maria Reichelt, the currency analyst at Commerzbank, stated that what matters now for currencies is still the economic outlook. She also added that the key is still which countries are emerging after coronavirus pandemic as winners.

Investors expect non-farm payrolls, which are due later on Friday, to show U.S. jobs creation slowed in July from the previous month. That would indicate that a resurgence in coronavirus infections is undermining the economic recovery there.

Despite all misgivings, the U.S. dollar is recovering from a persistent sell-off in recent weeks. Earlier, it weakened due to a combination of surging U.S. coronavirus infections, a lack of consensus in Washington over additional fiscal stimulus, and a steady fall in Treasury yields.

However, the dollar’s fast rebound proved that any shift in traders’ risk sentiment could easily bring back appetite for the greenback.

Thus far, U.S. Republicans and Democrats have failed to reach an agreement on the cost of fiscal stimulus measures. Meanwhile, investors say that this stimulus is necessary to prevent the economy from losing more momentum.

How did the Euro and other currencies fare?

The euro tumbled down from its highs, the last trading lower by 0.3% at $1.1845. The British pound also declined by 0.2% to $1.3115.

Meanwhile, other major currencies weakened against the dollar as well. But the Japanese yen was an exception, trading flat at 105.58.

The Australian dollar dropped due to concerns about worsening U.S.-Chinese relations. The Reserve Bank of Australia’s downbeat assessment of the local economy also hurt the currency. It stood lower by 0.3% at 0.7220 at last.