Dollar Down Amid Rising U.S.-China Tensions
The dollar was down on Monday morning in Asia, giving up some of its gains on Friday.
U.S.-China tensions rose over the weekend after White House trade advisor Peter Navarro suggested in a “This Week” interview that Beijing sent “hundreds of thousands of Chinese on aircraft to Milan, New York and around the world” to spread the virus after hiding it from the world for two months.
Meanwhile, U.S. Federal Reserve Chair Jerome Powell said in a separate interview that the U.S. economy could shrink up to 30% in the second quarter but will avoid a second Great Depression in the long run.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies down 0.11% to 100.325.
“At the fore of market participants’ minds is that we are seeing those (China) tensions just ratcheting higher, so there has been supporting for the U.S. dollar on the back of that,” Commonwealth Bank of Australia Analyst said.
Also comments last week from Fed officials around the risks to the U.S. economy being skewed to the downside risks around the second wave of infection, I think that will also continue to underpin the U.S. dollar this week.
The USD/JPY pair gained 0.10% to 107.12 after Japan slipped into recession for the first time since 2015.
The USD/CNY pair gained 0.06% to 7.1058. The Trump administration blocked chip supplies to Huawei Technologies, and investors are on edge for a response after a possible Chinese retaliation was reported.
The GBP/USD pair rose 0.05% to 1.2111 Andrew Haldane, Bank of England chief economist, said on Saturday that the bank is considering negative interest rates.
The economy is weaker than a year ago and we are now at the effective lower bound, so in that sense, it’s something we’ll need to look at – are looking at – with somewhat greater immediacy.
Down Under, the AUD/USD pair jumped 0.51% to 0.6447. Australia added its voice to the call for an examination into China’s initial handling of the COVID-19 virus, and China suspended beef imports from four companies in New South Wales last week. But there were reports of conciliatory remarks from the Chinese Foreign Ministry.
The NZD/USD pair was up 0.45% to 0.5958.