The dollar has put an end this Monday to the falls that were tonic last week, to leave rises before the majority of its rivals, putting into play its role as an active refuge as confinement expansions are made public in countries like the United States. . The yen, considered an active traditional refuge, has also risen.
However, experts indicate that the price action has normalized after the rally that preceded the correction in recent days, as the crisis is liquidated for control “for now.” “It has been needed, those of 30,000 million in purchases of annual bonds of the Federal Reserve (Fed), among others, but the dollar seems to be under control”Says Stephen Innes, analyst at Axitrade.
The dollar has risen against the pound, the euro, the kiwi and the Australian dollar. The pound sterling is down 0.7%, while the euro’s decline is 0.5%. “Now that the funding pressure (in dollars) is easing a bit, the focus is shifting towards assessing the damage,” said Bank of Singapore currency analyst Moh Siong Sim.
The safe Japanese yen rose 0.5% to 107.41 yen per dollar. Both the dollar and the yen posted strong gains against emerging market currencies. “Risk aversion is likely to remain high with the United States as the epicenter of COVID-19,” analysts at the National Australia Bank said in a note.
Experts also highlight that this week a battery of macro data is expected in the US that is not very flattering. With this picture ahead, there are several questions to ask, says Adrian Aquaro, an analyst at Trader College. “The first is whether this crisis will last a long time or, as many speculate on the New York Stock Exchange, it will be overcome in a few months.” The virus crisis has reached the United States, and the number of detected cases, such as that of victims that unfortunately has been claimed, seems to be heading to be the most serious in the world. The policy of the Donald Trump government to combat the spread of the virus is confusing and erratic, with twists and turns that combine the fear of a massive contagion with the conviction that in the face of a prolonged quarantine the country will go into recession, and Trump’s re-election will be truncated.
The other important question is “how the dollar will react to such a battery of negative data,” added the expert. The weekly jobless claims petition last Thursday, It was the worst in history and had no effect on the markets. “Many believe that the dollar will grow again despite the bad reports, given that in extreme circumstances operators will turn to the bill; others, more orthodox, believe that the current reign of the dollar will be for a time on the side,” says the expert.
The additional problem for the dollar to drop is that on the side of the euro, the pound sterling and the yen, its main rivals, no major incentives appear either. The euro will begin to go through a new stage, with a record of money set by the European Central Bank, and with an issue of 750 billion by Germany, thus leaving its traditional fiscal discipline.
The pound sterling grew strongly the week before, but does not appear to have the strength to continue much further. Everything is heading towards the 1,2000 dollar zone being the support for the next few days, at a time when the crisis is also hitting the UK hard. The Bank of England promised aid, and cut its interest rate off schedule, and the growth of the pound seemed more linked to the weakness of the dollar in recent days than to its own strength.
The yen may be the exception, if the markets look for it again as a refuge. Its strong growth in the last few days is significant, and could remain firm during the week that begins.