TOKYO, Sept 24 — The dollar extended gains against most currencies today as signs of economic slowdown in Europe and the United States renewed concern about a second wave of coronavirus infections.
The euro, which has already taken a hit due to worries about a return to severe lockdown restrictions, faces an additional hurdle later today with the release of data on German business sentiment.
The dollar is likely to continue to rise as another spike in coronavirus cases and the Federal Reserve’s warnings that the US economy needs more fiscal stimulus cause investors to repatriate funds from riskier assets.
“Risk is being sold across the board, and there is a big unwinding of dollar shorts,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities.
“Questions surrounding the coronavirus and the need for even more stimulus are turning flows back to the dollar.”
The dollar traded at US$1.1658 per euro today in Asia, just shy of a two-month low high reached yesterday.
The pound bought US$1.2714, near its weakest level since late July.
The dollar was quoted at 0.9240 Swiss franc, which is near a nine-week high.
The US currency bought ¥105.40, holding onto a 0.4 per cent gain from the previous session.
The dollar has rallied this week as rising coronavirus infections in Europe and Britain undermined investor optimism about vaccine progress.
The Ifo survey due later today is forecast to show an improvement in business morale in Germany, Europe’s largest economy.
However, sentiment for the euro has already suffered a big blow after surveys released yesterday showed new restrictions to quell a resurgence in coronavirus infections slammed the euro zone’s services industry into reverse.
The mood for riskier assets has also soured after data yesterday showed US business activity slowed in September and several Fed policymakers warned that further government aid is needed to bolster the economy.
The dollar index, which pits the dollar against a basket of six major currencies, stood at 94.336 today, close to a nine-week high.
There are no major economic data releases scheduled during the Asian session, so trading could be subdued, analysts said.
Some investors are watching the Australian and New Zealand dollars, which have come under pressure due to growing expectations for additional monetary easing.
A recent decline in commodity prices is expected to increase downside risks for the Antipodean currencies, some traders say.
The Aussie traded at US$0.7069, near its weakest since July 21.
Across the Tasman Sea, the kiwi bought US$0.6549 after tumbling by 1.3 per cent in the previous session. — Reuters
