US dollar softer as euro rises on Franco-German proposal for recovery fund

Reuters NEW YORK | Updated on May 20, 2020 Published on May 20, 2020

The US dollar fell against the euro on Tuesday as the common currency added to Monday's gains on a Franco-German proposal for a fund that would offer grants to European Union regions and sectors hit hardest by the coronavirus pandemic.

Encouraging results from the trial of a vaccine for COVID-19 reduced demand for safe havens and the greenback rose to a near one-month high against the Japanese yen..

Germany and France, whose agreements usually pave the way for broader EU deals, proposed that the European Commission borrow 500 billion euros ($550 billion) on behalf of the whole EU. The Commission is expected to outline their proposal before a European summit scheduled for May 27.

The euro rose 0.08% against the greenback at $1.09235, on pace for a two-day gain of about 1 percent.

“The Franco-German proposal represents a material step forward towards harnessing joint fiscal capacity to provide sustained fiscal stimulus to support the economic recovery,” said Lee Hardman, currency analyst at MUFG.

The common currency was also supported by a survey showing German investor sentiment improved much more than expected in May as concerns eased over the impact of the coronavirus pandemic on Europe's largest economy.

The greenback found little support from data showing US homebuilding dropped by the most on record in April.

The dollar, which draws safe-haven flows when risk appetite falls, has softened as investors took heart from encouraging early-stage data for a potential coronavirus vaccine.

“The USD is a safe haven just like the CHF or JPY and it was safe havens under pressure from yesterday morning straight through to now,” said Brad Bechtel, global head of FX at Jefferies.

Governments reducing restrictions has also helped investors grow optimistic that economies could soon return to normal.

On Tuesday, US President Donald Trump said he will sign an executive order directing federal agencies to eliminate ”unnecessary regulations that impede economic recovery.”

The Australian and New Zealand dollars were stronger on the day amid progress on reopening the global economy and vaccine optimism.

Against the Japanese yen, which tends to draw investors during times of geopolitical or financial stress, the dollar rose 0.37% to a near one-month high.

The pound rose 0.39% against the dollar, a small recovery relative to its recent seven-week lows. Sterling is held down by Brexit risks and speculation about negative rates.

Published on May 20, 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
  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.