Against fears concerning a resurgence in the pandemic, investors weighed hopes for a swift economic recovery, particularly in the United States. Thus, the dollar dipped slightly on Wednesday.
The onshore yuan was stable at 7.0176 earlier, halting a two-day rally. This was after the Chinese central bank’s daily midpoint for the currency was set a weaker than forecasted level. This then left investors fretting about the mounting economic costs of the pandemic, other Asian currencies straddled narrow ranges as a resurgence of coronavirus cases threatened a return of lockdown restrictions.
After coronavirus lockdown measures were re-imposed in Australia’s second-biggest city of Melbourne on Tuesday, Sentiment for the aussie stayed weak. Thus, the Australian dollar remained flat at $0.6944.
Risk appetite wanes as virus cases grow again. The gains of the dollar slow the rally of the yuan. The lockdown in the Australian city of Melbourne is weighing on the town.
Demand for the United States’ currency as a safe haven ticked down as oil prices eased over fears of oversupplying the commodity. Stocks dithered in Asia. In response, European bourses opened in negative territory.
Officials of Federal Reserve expressed concern. There is a certain idea that rising coronavirus cases can harm economic growth. This could then cause stimulus measures to begin to expire. Thus, risk sentiment will also be undermined.
The euro strengthened by a modest 0.12% to $1.2870. Meanwhile, a recent fall in selling positions provided room for possible further drops against the dollar.
Analysts of Commerzbank foreign exchange told clients in a note that what might look lethargic at first glance is most likely based on uncertainty as to what will happen to the economy.
Moreover, they said that there are high concerns that the continued spread of the virus can quickly stifle that recovery again. In turn, it will strengthen the United States dollar. This is because of its status as a safe haven.
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