US dollar on defensive as upbeat data dulls safe-haven appeal

Upbeat US and European economic data has put the greenback on the defensive against more growth-sensitive currencies. — Reuters pic
Upbeat US and European economic data has put the greenback on the defensive against more growth-sensitive currencies. — Reuters pic

TOKYO, July 2 — The US dollar was on the defensive against more growth-sensitive currencies today, following upbeat US and European economic data but renewed worries about the coronavirus blunted more aggressive risk taking.

The market sentiment gained an additional boost from the news that a Covid-19 vaccine developed by German biotech firm BioNTech and US pharmaceutical giant Pfizer has shown potential and was found to be well tolerated in early-stage human trials.

Sterling traded at US$1.2477, flat in early today trade but having gained 1.1 per cent so far this week. The Australian dollar fetched US$0.6919, having gained 0.7 per cent on the week.

The euro changed hands at US$1.1252, maintaining its gain of 0.3 per cent since the start of week.

The US manufacturing activity rebounded more than expected in June, with the manufacturing activity index by the Institute for Supply Management (ISM) hitting its highest in 14 months as firms and businesses resumed operations.

Similar surveys from China, Germany and France all pointed to a recovery in factory activity while the ADP National Employment Report showed June private payrolls increased 2.369 million jobs.

Data for May was revised upward to show payrolls surging 3.065 million, instead of tumbling 2.76 million as previously estimated.

More closely watched jobs reports from the government, due later in the day ahead of US public holiday tomorrow, are expected to show an increase of 3 million non-farm payrolls in June.

There are concerns about whether the US economy can sustain its recovery as coronavirus infections surge in many parts of the United States.

California dramatically rolled back efforts to reopen its economy yesterday, banning indoor restaurant dining in much of the state, closing bars and stepping up enforcement of social distancing and other measures as Covid-19 infections surge.

Against the yen, the US dollar traded at 107.45 yen, having fallen 0.4 per cent the previous day as it was unable to recover losses made in Asian trade on safe-haven bids.

“If we see further spikes in coronavirus cases, I would expect both the dollar and the yen to strengthen against other currencies,” said Tohru Sasaki, head of Japan market research at JP Morgan. — Reuters

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