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FOREX-Dollar steadies, yen gains; European economic data in focus

The dollar was up around 0.2% on the day at 97.407 against a basket of currencies at 0732 GMT, "Even if surprising on the upside, markets are likely to take the forward-looking indicator with caution given the rising Covid-19 cases in the US," ING wrote strategists in a note to clients. European economic data was also in focus, with eurozone manufacturing PMI due at 0800 GMT, and German unemployment data at 0755 GMT.

Reuters | Updated: 01-07-2020 14:25 IST | Created: 01-07-2020 13:24 IST
FOREX-Dollar steadies, yen gains; European economic data in focus
Representative Image Image Credit: ANI

Currency traders were broadly cautious in early London trading on Wednesday, with the Japanese yen seeing its first session of gains in more than a week, before key European and U.S. economic data.

The dollar rose overnight before erasing gains, ahead of U.S. manufacturing data for June, which is expected to show a rebound in activity. The dollar was up around 0.2% on the day at 97.407 against a basket of currencies at 0732 GMT, "Even if surprising on the upside, markets are likely to take the forward-looking indicator with caution given the rising Covid-19 cases in the US," ING wrote strategists in a note to clients.

European economic data was also in focus, with eurozone manufacturing PMI due at 0800 GMT, and German unemployment data at 0755 GMT. The euro was broadly flat on the day, at $1.12275.

"In line with the generally calmer trend in FX markets, EUR/USD should stay around 1.1200 today," ING strategists said. Investors have been betting that the surge in new infections in the U.S. south and southwest will not derail a broader global economic recovery.

But new U.S. COVID-19 cases rose by more than 47,000 on Tuesday, according to a Reuters tally, the biggest one-day spike since the start of the pandemic, as the government's top infectious disease expert said that number could soon double. The European Union has excluded the United States from its initial "safe list" of countries from which the bloc will allow non-essential travel from Wednesday.

A localised lockdown of more than 300,000 people in the suburbs north of Melbourne in Australia will start for a month on Wednesday, after two weeks of double-digit rises in new coronavirus cases in Australia's second most populous state. The Japanese yen rose around 0.3% versus the dollar, to 107.635, its first session of significant gains in more than a week.

The riskier Australian and New Zealand dollars fell in overnight trading before recovering in early London trading. Versus the dollar, the Aussie was at 0.6908 and the kiwi at 0.6458 . Geopolitical tensions also contributed to investor caution, and China made the first arrest under new national security law which limits the freedom and autonomy of Hong Kong.

The United States and its Asian and Western allies criticised the authoritarian legislation. Washington said it would continue to take strong action against China. The Swedish crown was broadly flat after the Riksbank kept rates unchanged 0%.

After a spike in March, the crown recovered to its pre-coronavirus levels at the start of May and has been broadly stable since. Versus the euro, it was at 10.466 on Wednesday, down around 0.1% on the day. "SEK is clearly the market's favourite amongst the Nordic currencies," wrote Antje Praefcke, Commerzbank FX strategist, in a note to clients. "NOK is suffering as a result of the double burden caused by the low oil price and the corona lockdown, whereas SEK is benefitting from the Swedish government's and central bank's diverse approach."

Versus the euro, the Norwegian crown rose around 0.3% to a one-week high of 10.7785.


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