Dollar Gains on Virus Worries; Sterling Shows Strength By Investing.com


© Reuters.

By Peter Nurse

Investing.com – The return of risk aversion to the financial markets Tuesday has prompted more gains for the U.S. dollar, amid concerns about the extent of the damage caused by the coronavirus in China, but sterling is also showing signs of strength.

At 03:00 ET (0800 GMT), traded at 1.0836, just off the low of 1.0823, the lowest level since April 2017. The , which tracks the greenback against a basket of six other currencies, stood at 99.073, having earlier climbed as high as 99.132, again at heights not seen for over two years. traded at 1.30, down just 0.1%. Additionally, the pair gained 0.3%, climbing to 7.0022, and back above the physiologically important 7 level.

The Australian dollar also traded lower after the Reserve Bank of Australia reiterated that low interest rates will probably be required for an extended period, flagging concerns about the coronavirus.

At 03:00 ET (0800 GMT), the pair fell 0.4% to 0.6683.

The number of new Covid-19 cases fell to 1,886 on Monday from 2,048 the day before. However, the World Health Organization cautioned Tuesday that “every scenario is still on the table” in terms of the epidemic’s evolution.

Throw in tech giant Apple’s warning that it doesn’t expect to meet its revenue guidance for the March quarter; a senior Chinese official saying that the Covid-19 virus would have a “major” impact on February’s production and supply chains; and the likes of Capital Economics stating in a report that it is now all but certain that China’s economy will contract in quarter-on-quarter terms in the first quarter, and it’s no surprise the dollar, which is often seen as a safe haven, is in demand.

The U.K. pound is a less likely buying candidate, but it has moved sharply higher against the beleaguered euro.

Sterling closed last week on a high note after the resignation of Chancellor Sajid Javid, “many have taken as an indication that Boris Johnson’s team is gearing up for a more significant fiscal stimulus package set to be announced in March,” said John Hardy, Head of FX Strategy at Saxo Bank. “The prospects for an economic rebound on fiscal policy doing the heavy lifting would allow the Bank of England to maintain the policy rate unchanged for now.”

This has resulted in the euro falling back its lowest level versus the pound since the December election and since just after the Brexit vote back in 2016.

At 03:00 AM ET (0800 GMT), traded at 0.8336, just off the 0.8327 low seen earlier Tuesday.

More losses are possible, with the German , at 05:00 AM ET (1000 GMT), likely to show a sharp drop in confidence in the eurozone’s largest economy with this being the first post-coronavirus sentiment indicator. Additionally, data in the U.K., half an hour earlier, is likely to show the jobs market remains healthy.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Leave a Reply

Your email address will not be published. Required fields are marked *