Dollar falls as focus shifts to recovery prospects

Dollar, euro and pound banknotes are seen in this picture illustration. — Reuters pic
Dollar, euro and pound banknotes are seen in this picture illustration. — Reuters pic

TOKYO, June 3 — The dollar fell against most Asian currencies today as prospects of more government stimulus and a global economic recovery emboldened investors to step up holdings of riskier assets.

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

The Aussie, which has benefited from signs its economic downturn may be less severe than initially feared, could get an additional boost if first quarter gross domestic product data due later today shows the country dodged a contraction.

China’s yuan is also in focus before the release of services sector data from the world’s second-largest economy, which could bolster expectations for economic recovery.

The greenback also fell against the British pound and nursed losses against the safe-haven Swiss franc as investors pondered mass protests against racism spreading across the United States.

“The US 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 rose early in Asian trading to US$0.6930 (RM2.95), the highest since January 7.

Across the Tasman Sea, the New Zealand dollar jumped to US$0.6391, the highest since March 9.

The greenback also slumped to a one-month low of US$1.2584 against the British pound.

The Aussie continued to draw buyers after the Reserve Bank of Australia yesterday focused on the prospects for a speedy recovery from the coronavirus shock.

Australia’s GDP data is unlikely to capture the full impact of coronavirus lockdowns had on the economy, but traders say sentiment for the Aussie has turned bullish because lockdown restrictions are easing and due to rising commodity prices.

Traders will also monitor the yuan’s opening in onshore trade and the release of China’s services PMI for May.

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’s fortunes against other safe-haven currencies were mixed.

The dollar bought 0.9619 Swiss franc, close to a two-month low.

However, the US currency briefly rose to a two-month high of 108.40 yen, threatening to break out of its recent trading range.

US President Donald Trump has threatened to use the military to quell spreading protests against racism and police brutality, but US stocks continue to rally, leaving some currency traders groping for direction.

The euro bought US$1.1180 today 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 (RM3.5 trillion) bond-buying programme, the Pandemic Emergency Purchase Programme, tomorrow, 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 yesterday. — Reuters

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