Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

FOREX-Dollar finds support as coronavirus, China data sap confidence

Published 14/08/2020, 04:21 pm
Updated 14/08/2020, 04:24 pm

* Dollar supported as risk appetite wanes

* Yen headed for worst week in two months after U.S. yields jump

* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook

SINGAPORE, Aug 14 (Reuters) - The dollar steadied on Friday as a jump in U.S. bond yields and a drag on sentiment from lacklustre Chinese economic data put the brakes on a selldown of the world's reserve currency.

China's retail sales unexpectedly extended their fall into a seventh month in July and industrial output missed expectations - suggesting bumps in even the world's most promising rebound. mood had the dollar within reach of snapping a seven-week losing streak against the risk-sensitive Aussie AUD=D3 , which has settled around $0.7149 and is flat for the week.

Tepid demand in a long-dated U.S. government bond auction on Thursday has also extended a surge in Treasury yields that has drawn some investors - especially from Japan - back to dollars.

The yen JPY= is on course for its weakest week against the dollar in two months and is down about 0.9% at 106.84 from last Friday's close.

The biggest loser has been the kiwi NZD=D3 , which was pressured at $0.6538, as the country faces a fresh coronavirus outbreak and after the central bank this week flagged increased bond buying and again mentioned the prospect of negative rates.

"Risk sentiment is slowing down," said Westpac FX analyst Imre Speizer. "It's too early to say the whole (dollar) downtrend is over...but it's got potential and at the very least it's putting a cap on the Aussie and kiwi."

Troubling signs also emerged on the health front in Asia, with 29 new cases in previously virus-free New Zealand prompting an extension of Auckland's lockdown and the biggest daily jump in new cases in South Korea since March. a basket of currencies =USD the dollar remains 0.2% lower for the week, but it has appeared to arrest a slide that has it about 9.5% below its March peak.

DIVERGENCE

Preliminary European employment and GDP numbers due at 0900 GMT and U.S. retail sales figures at 1230 GMT are the next set of data for investors to parse for signs of divergence between the U.S. and European recoveries.

Gathering faith in Europe's rebound, and doubts in the United States as the virus spreads and politicians remain deadlocked over the next relief package, have kept the euro firm even as the dollar has been able to bounce a bit elsewhere.

A fall last week in the number of applications for unemployment benefits in the United States to below one million was welcome surprise, but with some 30 million out of work and stimulus plans stalled the outlook remains grim. euro EUR=EBS hung on at $1.1816 in the Asia session on Friday and the pound GBP=D3 was also steady at $1.3062, as investors have sought to focus on a rebound in growth in June rather than the diabolical quarterly contraction.

Another element of divergence has opened up in the Tasman Sea, where central banks on either side - in Australia and New Zealand - are striking quite a different tone.

The Reserve Bank of New Zealand (RBNZ) sparked a bond rally this week by promising to extend its own purchases and, next week, speed them up as well.

And while the RBNZ talked about sub-zero rates, Reserve Bank of Australia Governor Philip Lowe re-iterated on Friday that fiscal support was what's needed. RBNZ) are pro-active," said Chris Weston, head of research at Melbourne brokerage Pepperstone.

"And if they want something they don't sit on their hands to see how things evolve, they make it happen, or at least they try. This to me is why AUD/NZD is likely going higher," he said.

The Aussie last sat at a 22-month high of NZ$1.10941 AUDNZR= , having forged nearly 1% this week and the spread between Australian and New Zealand 10-year debt, at 28 basis points, is at its widest since May. (Editing by Shri Navaratnam and Jacqueline Wong)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.