Dollar steadies as overnight risk-off move eases
NEW YORK (June 15) - The U.S. dollar was slightly lower in North American morning trade on Monday, stabilizing after a move higher overnight on a sell-off in risk assets over rising fears of a second wave of coronavirus infections.
The dollar index =USD, which measures the U.S. currency against a basket of six rivals, was 0.12% lower at 97.060. Still, the dollar remained far above last week’s three-month low, and risk assets broadly remained higher as fears of rising infections drove investors into safe havens like the dollar.
Against the euro EUR= it was 0.06% weaker to $1.126 and against the British pound GBP= it was 0.10% weaker to $1.255. The U.S. S&P 500 index .SPX was last down 0.85%, steadying after earlier in the session hitting its lowest since May 22.
China reintroduced restrictions in some areas after Beijing reported its biggest cluster of new infections since February. In the United States, more than 25,000 new cases were reported on Saturday alone.
“We’re focusing on the second wave of infections. There are already 20 states or so that are spiking, but also the new cases in Tokyo, and perhaps more alarming, in Beijing. That’s a reason to sell off stocks,” said John Doyle, vice president of dealing and trading at Tempus Inc.
Doyle, however, also said that the dollar’s strength since its bottom on Wednesday was less about fundamentals and more of a recalibration following an overblown recovery in risk. Since the Federal Reserve pledged unprecedented support to bolster financial markets hard-hit by the coronavirus pandemic, U.S. stocks jumped to near where they started the year.
“Dollar weakness - but also equity strength - was maybe overdone at the beginning of June, so we’re trying to find new ranges in both,” said Doyle.
“We think the trend is towards dollar weakness, but in the near-term, I think we’re going to be settling into some ranges before it loses more.”
Understanding the broader move higher in the dollar since last Wednesday as a recalibration also helps explain why the safe-haven Japanese yen had been strengthening against the dollar. On Monday it was slightly weaker at 107.38 yen to the dollar JPY=.
Reuters
