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Dollar Falls As Risk Sentiment Boosts

The dollar is losing further momentum and was on the defensive in forex trading on Tuesday. Risk sentiment was boosted by further evidence that the virus has peaked in some countries. This includes Europe while the U.S. has also seen scattered evidence of improvement.

The U.S. currency fell in Asia on Tuesday morning as investor risk sentiment improved.

The  U.S. Dollar Index stood at 100.235, fell 0.5%, with the loonieAussie and kiwi all up over 1%. The Reserve Bank of Australia prepares to announce its decision on interest rate later today. Moreover, NZD/USD pair went up 0.47% to 0.5958. 

The two antipodean risk currencies also benefitted from the increased investor risk appetite.

USD/JPY dropped 0.3% to 108.88, while EUR/USD was up 0.6% to 1.0859. Junichi Ishikawa, senior FX strategist at IG Securities said the yen will not react much to the state of emergency. That’s because other currencies are focused on signs that the coronavirus curve is starting to flatten out, he added.

GBP/USD was up 0.7% to 1.2316 despite PM Boris Johnson moving into intensive care overnight due to his worsening coronavirus symptoms.

Ishikawa said the FX market has remained fairly calm. However, there will be more downside for the sterling if PM Johnson’s condition gets any worse. 

The Price of Oil Impacts the Strength of the Dollar

Danske Bank said the USD and oil have become an increasingly uneven relationship. U.S. oil production is now a key liability for the U.S. currency. 

Danske said they think risks are tilted towards a disappointment and expect Brent oil to stay sub-USD40/bbl. This could fuel USD/JPY to move towards 106 again near term, Danske added.

Furthermore, by extension, they generally also find it too early for commodity currencies to see a forceful recovery. This is even if NOK remains an exception due to notably its fiscal support, Danske added.

Meanwhile USD/NOK fell 1.4% to 10.2866, while the price of Brent rose 3.1% to $34.09 a barrel.

The USD/CNY pair lost 0.14% to 7.0808 as Chinese employees returned to work after a holiday yesterday. In forex the dollar loses against most emerging market currencies, with the Chinese yuan rising around half a percent. 

Meanwhile, daily death toll in Spain fell on Monday, fourth day running to 637, its lowest level since March 24. Italy reported 525 deaths on Sunday, the fewest since March 19 however inched up again on Monday. 

U.S. Governor Andrew Cuomo said Monday that New York’s death rate has been ‘effectively flat for the last two days. The city has recently been the epicenter of the outbreak in the U.S.

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