TOKYO, July 31 ― The dollar slipped to two-year lows today and is on track to post its biggest monthly decline in 10 years, as investors worried that a recovery in the US economy could be stymied by a second wave of coronavirus.

Confidence in the US currency was undermined further after US President Donald Trump raised the possibility of delaying the nation's November presidential election.

The dollar index fell to 92.777, and is on course to post its biggest monthly fall in 10 years.

“At the root of the dollar's weakness is the fact, which was highlighted by Fed Chairman (Jerome) Powell the other day, that US coronavirus cases started to increase in mid-June, curbing consumption and sending the economy downhill,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

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The US Labour Department data showed initial claims for unemployment benefits increased 12,000 to a seasonally adjusted 1.434 million in the week ending July 25, a sign that recovery in the employment market is stalling.

That poured cold water on hopes of recovery after a devastating recession in the previous quarter. Data yesterday showed that the US economy contracted by 32.9 per cent in the second quarter, the steepest pace since the Great Depression.

The US Congress was no closer to a deal extending or replacing the extra US$600-per-week (RM2,544) in payments to tens of millions thrown out of work by the coronavirus pandemic, just one day before a federal jobless benefit was set to expire.

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Adding salt to the dollar's injury, Trump raised the idea of delaying the November 3 US elections, although it was immediately rejected by both Democrats and his fellow Republicans in Congress ― the sole branch of government with the authority to make such a change.

“The mere suggestion by Trump of a delay does play to concerns that the election result will be challenged in November (should Trump lose), and that, because of the likely larger than usual share of votes via mail in ballots due to the pandemic, we might not now (get) the result on election night itself,” wrote Ray Attrill, Head of FX Strategy at National Australia Bank in Sydney.

Leading the charge against the dollar was the euro, which has gained traction after European Union leaders agreed this month to a €750 billion economic recovery fund, taking on debt jointly in a major boost to regional cooperation.

The euro hit a two-year high of US$1.1889 and last traded at US$1.1869, having gained 5.7 per cent so far in July, also the biggest gain in a decade.

Against the yen, the dollar hit a 4 1/2-month low of ¥104.52 and last stood at 104.54, having lost 3.1 per cent this month.

Likewise the British pound stood at US$1.3119 after hitting a 4 1/2-month high of US$1.3136. ― Reuters