TOKYO, Aug 3 — The US dollar ticked up in early Monday trade, clinging to its rebound late last week, but mounting concerns about a slowing US economic recovery from coronavirus epidemic kept a lid on gains.
The dollar rose 0.3 per cent to ¥106.20, having gained almost 1 per cent on Friday thanks in part to month-end buying following its dive into a 4.5-month low of 104.195.
The euro also shed 0.3 per cent to US$1.1744, off Friday’s two-year high of US$1.1908.
The common currency hit a speed bump as there were some technical signs of being over-bought in the near-term, and with speculators’ long position hitting a record level, said Minori Uchida, chief currency analyst at MUFG Bank.
“But the dollar’s decline is likely to continue. Real US interest rates are declining even as the country is running a big current account deficit, a situation we hadn’t have for a long time,” he said.
US bond yields have fallen to their lowest level since the market turmoil in March triggered by the pandemic, with the 10-year yield slipping to near 0.50 per cent, undermining the yield attraction of the dollar.
That reflected worries US economic recovery could be undercut by a resurgence in Covid-19 cases.
US policy makers have so far struggled to clinch a deal to pump more money into the world’s largest economy even as an expanded unemployment benefit, worth about US$75 billion (RM318 billion) per month and accounting for nearly 5 per cent of personal income, expired on Friday.
White House Chief of Staff Mark Meadows said yesterday he was not optimistic on reaching agreement soon on a deal for the next round of legislation to provide relief to Americans hit hard by the coronavirus pandemic.
A growing US fiscal deficit to finance the stimulus prompted Fitch Ratings to revise the outlook on the United States’ triple-A rating to negative from stable.
While the market has not shown immediate reaction to the downgrade, that made a sharp contrast with the European Union, which got a boost from Standard and Poor’s decision to upgrade its rating outlook to positive from stable.
Sentiment on the euro has improved after European Union leaders agreed last month to a €750 billion (RM3.74 trillion) economic recovery fund — while also taking on debt jointly in a major boost to regional cooperation.
Another source of concern is an intensifying tension between Washington and Beijing as US President Donald Trump threatens to ban TikTok, a popular video app run by China’s ByteDance.
Secretary of State Mike Pompeo said yesterdayTrump will take action shortly on Chinese software companies that are feeding data directly to the Beijing government, posing a risk to US national security. — Reuters
