- Oil, ore rally boosts Loonie and AUD
- Pound near 7wk low on Brexit worries, talk about negative rates
- Graphic: World FX rates in 2020 tmsnrt.rs/2RBWI5E
By Tom Westbrook
SINGAPORE, May 18 (Reuters) – The dollar wavered on Monday as investor optimism about the re-opening of economies round the world lifted commodity prices and exporters’ currencies, while talk about negative interest rates held the pound near an almost two-month low.
Oil futures rose 3%, nudging the Canadian dollar slightly higher. Dalian ore futures hit a record peak, helping lift the Australian dollar from a one-week low.
As centres of the coronavirus outbreak from ny to Italy gradually lift restrictions, the improved sentiment also supported other Asian currencies. But tension between the us and China tempered the general mood and kept a lid on broader gains.
The New Zealand dollar rose 0.4%, though at $0.5956 it couldn’t break past 60 cents. The Aussie was up half a percent, but still remained under 65 cents at $0.6455.
The Chinese yuan, a barometer of Sino-U.S. tensions, barely moved from a one-week low hit last week – highlighting the caution underpinning traders’ outlook.
“There are three hurdles to cross: the form of the recovery…U.S.-China tensions and worry over unconventional monetary policy,” Bank of Singapore FX analyst Moh Siong Sim said.
“I think the dollar is settling in to a broad trading range waiting to ascertain how of these macro uncertainties play out.”
Against the yen, the U.S. currency sat more or less within the middle of a variety it’s kept since April, at 107.10 per dollar. it had been marginally softer against a basket of currencies .
The pound sank to a seven week low of 89.58 pence per euro and was struggling at $1.2107 after a week-long deadlock over a post-Brexit trade affect the ecu Union and increasing specialise in the likelihood of negative rates.
The Bank of England’s chief economist Andy Haldane didn’t rule such a move call at an interview with the Telegraph newspaper published on Saturday.
REMAINING DEFENSIVE
The depth of the economic damage already wrought by the coronavirus pandemic is additionally becoming plainer even as rising trade tensions obscure the outlook.
Japan has slipped into recession for the primary time since 2015, and policymakers are bracing for the nation’s worst postwar slump within the current quarter. Thailand’s economy contracted at its sharpest pace in eight years.
Purchasing Managers’ Index surveys due across major economies later in the week offer subsequent insight into the outlook.
Markets also are jittery for a Chinese response to the Trump Administration’s move to dam chip supplies to Huawei after China’s Global Times newspaper flagged possible retaliation.
“We remain defensive,” Bank of America’s exchange analysts said during a Friday note that was published on Monday.
“This week, we went short Aussie/yen,” they wrote.
“In addition to our more bearish global outlook than the consensus, we are increasingly concerned about U.S.-China trade risks, as China are going to be unable to satisfy ‘Phase 1’ trade commitments and is facing criticism about the way it’s handled COVID-19.” (Reporting by Tom Westbrook in Singapore. Additional reporting by Winni Zhou in Shanghai Editing by Shri Navaratnam)
