Renewed concerns about diplomatic tension between China and the United States and rising coronavirus cases put a dent in risk appetite. On Tuesday, against most currencies, the United States dollar was hemmed into narrow ranges.
Investors are waiting for the data on German investor sentiment to help gauge the pace of Europe’s recovery from the health crisis. Against the pound and the greenback, the euro held onto gains.
A recent comeback of novel coronavirus infections has caused some areas to place new restrictions on business activity. Thus, currency trading has thinned out.
Markets are now facing an additional threat from tit-for-tat retaliation between Beijing and Washington. The danger is about the territorial claims in the South China Sea, civil liberties in Hong Kong, and the United States financial markets.
Junichi Ishikawa works at IG Securities. He is a senior foreign exchange there. He said that Now, the focus has shifted to whether the next round of coronavirus lockdowns will be large enough for damaging economic growth.
Dollar and Yen
Moreover, he added that the Hong Kong problem might lead to new trade friction. Adverse developments on either front can cause stocks to adjust lower. Furthermore, it can drive some safe-haven flows to the yen and the dollar.
On Tuesday, the dollar stood at 107.35 yen in Asia following a 0.4% gain in the previous session.
After eking out three consecutive sessions of narrow gains, the United States dollar traded at 0.9419.
Resting below a one-month high reached on Monday, the euro was quoted at $1.1346. It held onto a 0.9% gain from the previous session.
China and the United States wage diplomatic battle, as already said. They have to fight on several fronts. Thus, that might have the potential of unsettling financial markets.
The United States President Donald Trump administrations are planning to scrap a 2013 agreement between Chinese and United States auditing authorities soon.
