Home Forex Dollar falls as economic recovery hopes boost Asian forex

Dollar falls as economic recovery hopes boost Asian forex

by Jonathan Adams
Asian forex

The dollar fell against Asian currencies on Wednesday as prospects of more government stimulus and a global economic recovery led investors to step up holdings of riskier assets

The dollar fell against most Asian currencies on Wednesday as prospects of more government stimulus and a global economic recovery emboldened investors to step up holdings of riskier assets.

The Australian dollar surged to a five-month high against the dollar, as funds headed toward economies that are seen to be recovering the fastest from the coronavirus pandemic.

China’s yuan edged higher after a private survey showed the services sector in the world’s second-largest economy returned to growth, which could bolster expectations for economic recovery.

The greenback also fell against the British pound, the yen, and the Swiss franc as investors pondered mass protests against racism spreading across the United States.

The U.S. dollar is generally weak, said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo. The Australian dollar has a lot of room to run because there are still a lot of shorts that need to be covered. The economy recovery story is the main factor.

The Australian dollar surged more than 1% to $0.6982, the highest since Jan. 3.

The Aussie pared its gains after data showed the Australian economy contracted as expected in the first quarter, but traders say sentiment has turned bullish because lockdown restrictions are easing and commodity prices are rising.

The New Zealand dollar rose to $0.6430, the highest since March 9.

The greenback also slumped to a one-month low of $1.2615 against the British pound.

In onshore trade, the yuan briefly touched its strongest since May 13 before settling at 7.1068 per dollar after the Caixin/Markit services Purchasing Managers’ Index showed China’s services sector returned to growth in May for the first time since January.

The coronavirus first emerged in China late last year, but it is also the first major economy to ease severe lockdown restrictions, meaning it is likely to recover earlier than other countries.

The greenback grinded lower against safe-haven currencies due to concerns about the widening economic impact of protests in the United States.

The dollar bought 0.9613 Swiss franc, close to a two-month low.

The U.S. currency fell 108.47 yen, pulling back from a two-month high of 108.85 yen reached early in Asian trading on Wednesday.

U.S. President Donald Trump has threatened to use the military to quell spreading protests against racism and police brutality, but U.S. stocks continue to rally, leaving some currency traders confused about the market’s direction.

The euro bought $1.1186 on Wednesday in Asia, close to the highest since March 16, on hopes policymakers will support the euro zone’s weakest economies.

The European Central Bank is expected to increase its 750 billion euro ($839.25 billion) bond-buying programme, the Pandemic Emergency Purchase Programme, when it meets on Thursday, probably by around 500 billion euros.

The ECB scooped up all of Italy’s new debt in April and May but merely managed to keep borrowing costs for the indebted, virus-stricken country from rising, data showed on Tuesday.

This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
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