FOREX-As lockdowns ease, commodity currencies cautiously move up

The dollar wavered on Monday as investor optimism about the re-opening of economies around the world lifted commodity prices and exporters' currencies, while talk of negative interest rates held the pound near an almost two-month low. Oil futures rose 3%, nudging the Canadian dollar a touch higher. Dalian iron ore futures hit a record peak, helping lift the Australian dollar from a one-week low.

As centres of the coronavirus outbreak from New York to Italy gradually lift restrictions, the improved sentiment also supported other Asian currencies. But tension between the United States and China tempered the overall mood and kept a lid on broader gains. The New Zealand dollar rose 0.4%, though at $0.5956 it could not break past 60 cents. The Aussie was up half a percent, but still remained under 65 cents at $0.6455.

The Chinese yuan, a barometer of Sino-U.S. tensions, barely moved from a one-week low hit last week - highlighting the caution underpinning traders' outlook. "There are three hurdles to cross: The shape of the recovery...U.S.-China tensions and worry over unconventional monetary policy," Bank of Singapore FX analyst Moh Siong Sim said.

"I think the dollar is settling in to a broad trading range waiting to see how all these macro uncertainties play out." Against the yen, the U.S. currency sat more or less in the middle of a range it has kept since April, at 107.10 per dollar. It was marginally softer against a basket of currencies .

The pound sank to a seven week low of 89.58 pence per euro and was under pressure at $1.2107 after a week-long deadlock over a post-Brexit trade deal with the European Union and increasing focus on the possibility of negative rates. The Bank of England's chief economist Andy Haldane did not rule such a move out in an interview with the Telegraph newspaper published on Saturday.

REMAINING DEFENSIVE The depth of the economic damage already wrought by the coronavirus pandemic is also becoming plainer just as rising trade tensions obscure the outlook.

Japan has slipped into recession for the first time since 2015, and policymakers are bracing for the nation's worst postwar slump in the current quarter. Thailand's economy contracted at its sharpest pace in eight years. Purchasing Managers' Index surveys due across major economies later this week offer the next insight into the outlook.

Markets are also on edge for a Chinese response to the Trump Administration's move to block chip supplies to Huawei after China's Global Times newspaper flagged possible retaliation. "We remain defensive," Bank of America's foreign exchange analysts said in a Friday note that was published on Monday.

"This week, we went short Aussie/yen," they wrote. "In addition to our more bearish global outlook than the consensus, we are increasingly concerned about U.S.-China trade risks, as China will be unable to meet 'Phase 1' trade commitments and is facing criticism about the way it has handled COVID-19."

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)