Dollar Rises Amid Economic Collapse
The U.S. dollar has been in demand in European forex trading on Thursday, as evidence of the severity of global economic collapse prompted a flight to safety bid.
The International Monetary Fund forecast that growth in Asia will stall at zero percent this year.
Chang Yong Rhee, director of IMF’s Asia and Pacific department said it’s the worst growth performance in almost 60 years. This includes during the Global Financial Crisis and the Asian Financial Crisis.
Yet they expect Asia to do better than other regions in terms of economic activity, he added.
This follows on from very low retail sales figures in the U.S. as the March numbers dropped a record 8.7%. It was ahead of the weekly initial jobless claims release with another 5.1 million Americans expected to file for unemployment.
Kazushige Kaida, head of forex at Tokyo Branch of State Street said the U.S. currency maintains its momentum. This was following U.S. data yesterday.
Also worthy to note is the rise of Italian bond yields. This was after the idea of corona bonds failed to gain traction among EU finance ministers last week. Increasing yields among the European periphery will put the euro itself under pressure.
Danske Bank said, Italian 10-year yields are now back above 1.8%. It is the highest since before the ECB initiated its Pandemic Emergency Purchase Programme.
The U.S. Dollar Index stood at 99.820, up 0.3%, while EUR/USD fell 0.2% to 1.0888. GBP/USD fell 0.1% to 1.2501 while USD/JPY climbed 0.3% to 107.75.
The Dollar in Asia FX on Coronavirus Recovery
Investors trimmed short positions on Asian currencies, as China tries to jump-start its economy that has been ravaged by COVID-19. Also as a slew of measures by the U.S. Federal Reserve eased worries about dollar liquidity.
Investors were still bearish on all Asian currencies due to the coronavirus-driven rout. Although signs emerged showing that lockdowns and massive stimulus have helped in containing the virus and its devastating economic impact.
According to analysts, the trimming of bearish positions aligned with significant central bank injections. Those that have stabilized emerging markets, increased dollar funding and a potential peak in COVID-19 cases.
The Fed’s aggressive measures to cushion the impact of the pandemic on the U.S. economy also reduced dollar demand. This has eased pressure on bond and currency markets in Asia.
In forex news, bearish positions on the Indonesian rupiah fell from two weeks ago to their lowest since early March. This was after the central bank secured a $60 billion repo line with the Fed.
