NEW YORK, June 4 — The US dollar fell to an 11-week low against a basket of other currencies yesterday, on optimism that the worst of the economic downturn stemming from the global spread of the coronavirus is over.
The improving risk appetite has reduced demand for the greenback, which benefits from safe haven buying when markets are volatile and investors are reluctant to take risk. “Momentum seems to be running the table right now.
We think the broad pullback in the US dollar presents an attractive buying opportunity, but recognise there may still be room for additional weakness in the near-term,” analysts at Wells Fargo said in a report yesterday.
The dollar index against a basket of major currencies fell 0.22 per cent to 97.37, after earlier dropping as low as 97.28, the lowest since March 12.
US data yesterday showed that US private payrolls fell less than expected in May, suggesting layoffs were abating as businesses reopen, though the overall economy’s recovery from the Covid-19 pandemic will be slow.
US services industry activity also pushed off an 11-year low in May, though businesses appeared in no rush to rehire workers as they reopen.
The greenback gained 0.03 per cent against the Japanese yen to 108.69 yen, after earlier reaching 108.84 yen, the highest since April 9.
The Australian dollar, which has been one of the best performers from the increase in risk appetite, rose 0.23 per cent to US$0.6910 (RM2.94), after earlier reaching US$0.6983, the highest since January 3.
The euro rose 0.40 per cent to US$1.1214, after getting as high as US$1.1231, the highest since March 16. Investors are focused on whether the European Central Bank will increase the size of its 750 billion euro (US$669 billion) Pandemic Emergency Purchase Programme (PEPP) when it meets on Thursday.
Overnight euro implied volatility gauges jumped to 12 per cent, their highest in one month, suggesting traders were preparing for moves bigger than usual in the common currency.
Data yesterday showed that euro zone businesses suffered another devastating contraction in activity in May and while there are signs the worst is over, it could be months before there is a return to growth.
Sterling rose yesterday to a one-month high though Brexit risks weighed on the currency. — Reuters