Forex

Dollar on firmer footing as investors seek safety

Reuters SINGAPORE | Updated on March 30, 2020 Published on March 30, 2020

File Photo   -  Reuters

The dollar snapped a week of declines and the safe-haven yen found support on Monday, as coronavirus lockdowns tightened across the world and investors braced for a prolonged period of uncertainty.

After its worst week since 2009, the greenback climbed against the pound, euro, kiwi and the Australian dollar in a cautious Asian session.

Sterling was last 0.8 per cent softer at $1.2357, the Aussie down 0.5 per cent at $0.6134, while the euro fell by the same margin to $1.1077.

Against a basket of currencies the dollar rose 0.5 per cent to 98.831.

“Now that the (dollar) funding pressure is easing somewhat, the focus is pretty much shifting towards assessing the damage,” said Bank of Singapore currency analyst Moh Siong Sim.

“And there, the viral infection rate is still up in the air, (and) it's a bit of risk-aversion.”

The safe-haven Japanese yen was steady at 108.02 yen per dollar.

Both the dollar and yen rose against emerging market currencies after a weekend which brought more bad news on the virus front.

Total deaths are nearly 34,000 and the United States has emerged as the latest epicentre, with more than 137,000 cases and 2,400 deaths.

Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said the pandemic could ultimately kill between 100,000 and 200,000 people in the US, if mitigation was not successful.

Lockdowns are toughening worldwide and US President Donald Trump, who had talked about reopening the economy for Easter, on Sunday extended guidelines for social restrictions to April 30.

The Chinese yuan also slipped 0.3 per cent in offshore trade to 7.1062 after the People's Bank of China unexpectedly cut a key interbank interest rate, the seven-day reverse repurchase rate, by 20 basis points.

The Singapore dollar jumped briefly after the city-state's central bank eased policy, as expected, but emphasised stability rather than foreshadowing further easing.

Elsewhere the oil-exposed Norwegian krone fell heavily along with declining oil prices and the South African rand crumbled to a record low after Moody's cut South Africa's credit rating.

 

KING DOLLAR DETHRONED?

The dollar's modest gains on Monday barely recover a fraction of the ground it gave up last week, yet that slump followed a massive surge that leaves the US currency still elevated.

Over the past two weeks the dollar first posted its biggest weekly rise since the 2008 financial crisis and then its biggest weekly drop since 2009. Signs of funding stress have eased but not abated as hard cash remains in high demand.

“Risk aversion has been more important to the direction of the dollar than traditional interest rate differentials,” Standard Chartered analysts said in a note.

“For the dollar to surrender some of its recent gains, investors would need to shift their preferences back to a broader basket of safe-haven assets.”

Monday's bond rally showed some signs of a broader flight to safety, but a fall in gold and softness in the yen and Swiss franc suggest investors still favour dollars above all.

The franc fell half a per cent to 0.9562 per dollar.

Yields at the very short end of the US curve dipped into negative territory and the benchmark 10-year yield fell nearly 9 basis points to 0.6713 per cent.

“We aren't wavering in our long-held bullish dollar/emerging markets view,” said Jason Daw, head of emerging markets strategy at Societe Generale.

“It is a risk-off market, until it isn't, and bottom fishing has poor risk-reward.”

 

Published on March 30, 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!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.