Forex

Dollar eases on defiant economic hopes, negative rates spectre

Reuters Tokyo | Updated on May 08, 2020 Published on May 08, 2020

File Photo   -  Reuters

The Australian dollar traded at $0.6505 after a gain of nearly 1.5 per cent in the previous session

The dollar slipped on Friday as investors defied a broader sense of doom around upcoming United States (US) employment data and found reasons to buy riskier currencies with more governments slowly reopening their economies for business.

The greenback was undermined by a further hit to its yield attraction as US money markets priced in a small chance of negative interest rates next year.

The dollar's index against a basket of six other major currencies slipped to 99.829 from Thursday's high of 100.40.

The euro edged back to $1.0835 from Thursday's near two-week low of $1.07665 though it was down about 1.3 per cent on the week.

The Australian dollar traded at $0.6505 after a gain of nearly 1.5 per cent in the previous session.

The dollar's retreat against riskier currencies reflected a recovery in risk sentiment as global shares rallied, with Nasdaq index now wiping out its losses this year.

On top of aggressive monetary easing around the world, hopes of economic normalisation are supporting the mood as some countries in Europe and parts of the United States ease restrictions on economic activity.

Against the safe-haven yen, the dollar bounced back to 106.295 yen, from a seven-week low of 105.985 touched on Wednesday.

The greenback was also caught off guard as US short-term bond yields hit record low with markets starting to price in negative US interest rates for the first time.

Although Federal Reserve officials have said that they do not see negative rates as appropriate, the price action suggested some investors see a much worse downturn that could force the Fed to become more experimental with its crisis response.

Data on Thursday showed 3.169 million initial unemployment claims for the week ended May 2, more than economists' forecast of 3 million, and bringing total claims since late March to 33.5 million, or about one in every five workers.

The unemployment data due later in the day is expected to show a historic hit to the US labour market.

Nonfarm payrolls are forecast to have plunged 22 million in April, which would blow away the record dive of 800,000 seen during the 2007-2009 recession.

The unemployment rate is seen jumping to 16 per cent in April, which would shatter the post-World War Two record of 10.8 per cent touched in November 1982.

Some traders sold dollars to take profits ahead of the data.

“Everyone knows it is going to be terrible and people are focusing on the pace of a rebound from there,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

“But because this is an unprecedented pattern, you cannot find any historical example, and where there is no example, even artificial intelligence cannot find an answer,” said Sera.

Published on May 08, 2020

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Sincerely,

Support Quality Journalism
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.