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FOREX-Dollar holds advantage as money flees from risk assets

Published 2020-09-23, 10:56 p/m
© Reuters.
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* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

* Dollar rallies this week against most currencies

* Risk assets in retreat due to coronavirus concerns

* Signs of stuttering global economy hurt sentiment

* Euro looks to Ifo survey amid growing economic gloom

By Stanley White

TOKYO, Sept 24 (Reuters) - The dollar held onto gains against most currencies on Thursday as signs of an economic slowdown in Europe and in the United States revived concerns about the fallout from a second wave of coronavirus infections.

The euro, already hit by worries about a return to severe lockdown restrictions, faces an additional hurdle later on Thursday with the release of data on German business sentiment.

The dollar is likely to continue to rise as another spike in coronavirus cases in Europe boosts its safe-haven appeal, while Federal Reserve policymakers called on the U.S. government to provide more fiscal support. is being sold across the board, and there is a big unwinding of dollar shorts," said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities, referring to investors abandoning bearish dollar bets.

"Questions surrounding the coronavirus and the need for even more stimulus are turning flows back to the dollar."

The dollar traded at $1.1671 per euro EUR=D3 on Thursday in Asia, just shy of a two-month high reached on Wednesday.

The greenback held near a nine-week high against the Swiss franc CHF=EBS at 0.9225, and also held on to gains made in the previous session against the Japanese currency, to stand at 105.42 yen JPY=D3 .

The pound GBP=D3 bought $1.2732, near its weakest level against the U.S. currency since late July.

The dollar has rallied this week as rising coronavirus infections in Europe and Britain undermined investor optimism about a vaccine progress.

The Ifo survey due later on Thursday is forecast to show an improvement in the business morale in Germany, Europe's largest economy.

However, sentiment for the euro has already suffered a big blow after surveys released on Wednesday showed new restrictions to quell a resurgence in coronavirus infections slammed the euro zone's services industry into reverse. for riskier assets also soured after data on Wednesday showed U.S. business activity slowed in September and several Fed policymakers said that further government aid is needed to bolster the economy. dollar index =USD stood at 94.302 against a basket of six major currencies on Thursday, close to a nine-week high.

There are no major economic data releases scheduled during the Asian session, so trading could be subdued, analysts said.

In the onshore market, the yuan CNY=CFXS held steady at 6.8145 per dollar.

China's foreign exchange regulator granted fresh quotas under its outbound investment scheme for the first time since April 2019, official data showed, which allows domestically registered financial firms to invest in overseas markets.

The $3.36 billion worth of quotas come as the yuan has strengthened against the dollar over the past weeks amid accelerating foreign money inflows. investors are watching the Australian and New Zealand dollars, which have come under pressure on growing expectations their central banks could deliver more monetary stimulus.

A recent decline in commodity prices is expected to increase downside risks for the Antipodean currencies, some traders say.

The Aussie AUD=D3 traded at $0.7063, near its weakest since July 21.

Across the Tasman Sea, the kiwi NZD=D3 bought $0.6543 after tumbling by 1.3% in the previous session, when the central bank hinted at further monetary easing.

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