TOKYO, Sept 23 — The US dollar held onto gains against major currencies today, supported by positive US economic data and concerns about a second wave of coronavirus infections in Europe and Britain.
The New Zealand dollar is in focus before a meeting later today where the country's central bank is expected to leave its official cash rate at record lows and update its assessment of the economic outlook.
The greenback is likely to continue to grind higher in the short term as the coronavirus rattles sentiment in Europe, but uncertainty about this year's US presidential election means the dollar could be prone to more volatile swings.
“Some people are betting for more dollar strength against the euro, which looks overvalued,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
“The picture in Europe has completely changed, because the economic recovery is stalling and there is a second wave of the virus, but I'm also worried about US politics.”
The US dollar was quoted at $1.1708 per euro today in Asia, close to a two-month low hit in the previous trading session.
The pound bought US$1.2744, near the lowest since late July, after British Prime Minister Boris Johnson unveiled new restrictions on business activity to tackle a second wave of the coronavirus.
The US dollar was quoted at 0.9198 Swiss franc, holding onto a 0.6 per cent gain from Tuesday.
The US currency was little changed at 105.06 yen.
Yesterday the greenback was bolstered by data showing US home sales surged to their highest level in nearly 14 years in August, but comments from a prominent Federal Reserve official sent mixed signals.
The US economy risks a longer, slower recovery and “recessionary dynamics” if Congress fails to pass an additional fiscal stimulus package, Chicago Federal Reserve President Charles Evans said yesterday.
It is possible for the Fed to raise interest rates before inflation starts to average 2 per cent, Evans also said.
The US dollar index, which pits the dollar against a basket of six major currencies, rose 0.4 per cent yesterday to 93.975.
Sentiment for the euro has slowly weakened as investors grow increasingly worried about surging coronavirus infections in countries like France and Spain, raising the risk of lockdowns.
Many euro zone countries have reintroduced travel restrictions, forcing airlines to scale back passenger services after a relatively quick run up over the summer.
Traders in the pound and the euro are also worried that Britain and the European Union will fail to agree a free trade deal, which would cause additional economic strain.
The New Zealand dollar was quoted at $0.6631 ahead of policy decision by the country's central bank today.
The Reserve Bank of New Zealand is expected to hold off on further stimulus but traders want to see how the central bank assesses the impact of the coronavirus.
The Australian dollar held steady at US$0.7172, but the tone was slightly weak after a senior central banker yesterday flagged the prospect of currency market intervention and negative interest rates.
— Reuters
