Dollar stalls as economic uncertainties linger
The dollar edged slightly higher on Wednesday after slipping to 27-month low the previous session, but uncertainties about the U.S. economic recovery and a new fiscal stimulus package continued to weigh down the market.
The dollar hit fresh lows against most major currencies overnight as the Federal Reserve’s stimulus programmes weakened the greenback broadly and lifted U.S. stock indexes to record highs.
The dollar =USD was up 0.15% in Asian trade at 92.340 against a basket of currencies.
The euro EUR=EBS changed hands at $1.19305, having strengthened to its highest level since May 2018 in the previous session.
Sterling GBP=D3 eased modestly from Tuesday’s eight-month high of $1.3241, and was last quoted at $1.3236.
Although the dollar often functions as a safe-haven investment in times of crisis, it has fallen since the Fed’s intervention into financial markets to maintain liquidity in the midst of the COVID-19 pandemic.
The Fed’s programmes have pushed riskier assets to all-time highs and reduced demand for safe-havens, even as economic data has painted a bleak picture of the U.S. recovery.
Against the yen JPY=, the dollar last traded at 105.55 yen.
Investors are awaiting the release later on Wednesday of the minutes from the July 28-29 FOMC meeting, with speculation the Fed will adopt an average inflation target, which would seek to push inflation above 2% for some time.
Elsewhere in currency markets, the yuan CNH=D3 firmed 0.12% higher to 6.9165 per dollar, after hitting a five-month high on Tuesday at 6.9246.
· Morgan Stanley just picked this year’s best safe-haven currency
The Japanese yen and Swiss franc remain relatively safe bets, Morgan Stanley said Tuesday, but the investment bank picked the U.S. dollar as the best safe-haven currency in what’s left of turbulent 2020.
The greenback fell to a 27-month low on Tuesday against a basket of its peers, where the dollar index reached 92.477 — a level not seen since May 2018 as investors took on more risk. The S&P 500 rose to its highest level ever after regaining all of its coronavirus-related losses, having rallied more than 54% from its March low.
“We expect the US dollar (USD) to be the best safe-haven currency, especially now that lower US rates make it a more attractive funding currency for carry trades,” Morgan Stanley analysts wrote in a research note. Still, the analysts expect risk sentiment should remain supported for now, hence they said they keep a “bearish skew” on the dollar.
· No new U.S.-China trade talks scheduled: White House chief of staff
No new high-level trade talks have been scheduled between the United States and China but the two sides remain in touch about implementing a Phase 1 deal, White House Chief of Staff Mark Meadows told reporters aboard Air Force One on Tuesday.
U.S. President Donald Trump earlier told reporters during a visit to Yuma, Arizona, that he had postponed an Aug. 15 review of the trade agreement signed with China in January given his frustration over Beijing’s handling of the coronavirus pandemic.
“I postponed talks with China. You know why? I don’t want to deal with them now,” Trump said during a briefing on construction of a border wall with Mexico. “What China did to the world was not even thinkable. They could have stopped (the virus).”
· A Biden victory in U.S. presidential election could be ‘positive’ for Asia, Nomura says
If Democratic presidential nominee Joe Biden wins the upcoming elections in November that could be a boon for Asia, according to Nomura’s Rob Subbaraman.
“For Asia specifically, if Biden wins, I think it will be actually positive,” he told CNBC’s “Street Signs Asia” on Tuesday.
“A Biden presidency — if he were to win — will result in more certain policymaking, foreign policymaking,” said Subbaraman, who is head of global macro research at Nomura. “That’s been very lacking and I think there’ll be more coalition building. I think that it will be more generally favorable for the region.”
While the analyst said he expects Biden to “be tough” on China on more issues than just trade, he said the former U.S. vice president would be “positive for the rest of the world” overall.
· World’s largest shipping firm says demand will ‘significantly decline’ this year
Maersk, the world’s largest shipping firm, beat second-quarter profit expectations on Wednesday and said it expects demand to pick up in the third quarter, but warned of a “significant decline” across the year.
Despite being negatively impacted by a “sharp drop in volumes” in the second quarter, with revenues falling 6.5% from the same period last year as the global economy was brought to a standstill by the coronavirus pandemic, Maersk upped its full-year guidance on Wednesday.
The company reported a 25% rise in second-quarter EBITDA (earnings before interest, tax, depreciation and amortization) to $1.7 billion, outstripping the $1.575 expected by analysts.
Maersk, often seen as a bellwether for global trade, now projects 2020 EBITDA of between $6 billion and $7 billion, up from initial guidance of $5.5 billion.
· Japan’s exports tumble, capex outlook sags as demand wilts
Japan’s exports extended their double-digit slump into a fifth month in July as the coronavirus pandemic took a heavy toll on auto shipments to the United States, dashing hopes for a trade-led recovery from the deep recession.
Meanwhile, core machinery orders, a leading indicator of business spending, unexpectedly fell to a seven-year low in June, dashing hopes that domestic demand would make up for some of the slack from sluggish global growth.
The grim batch of data suggests the depressed conditions seen in the world’s third-largest economy in the second quarter showed no signs of rapid improvement in the current quarter, compounding challenges for policymakers as they look to prop up activity.
Total exports fell 19.2% in July from a year earlier, roughly in line with market expectations for a 21.0% decrease, government data showed on Wednesday.
It was, however, smaller than a 26.2% drop in June, which some analysts saw as a sign external demand may have bottomed out.
· German institute says coronavirus vaccinations could start in early 2021
The head of Germany’s vaccines regulator said some groups of people living in Germany could be vaccinated early next year against the coronavirus that has killed almost 800,000 worldwide and wreaked havoc on the global economy.
More than half a dozen drugmakers around the world are conducting advanced clinical trials, each with tens of thousands of participants, and several expect to know if their COVID-19 vaccines work and are safe by the end of this year.
Klaus Cichutek, head of the Paul Ehrlich Institut, told the Funke group of newspapers that data from Phase I and Phase II trials showed some vaccines triggered an immune response against the coronavirus.
“If data from Phase III trials shows the vaccines are effective and safe, the first vaccines could be approved at the beginning of the year, possibly with conditions attached,” he said.
“Based on assurances from manufacturers, the first doses for people in Germany will be available at that time, in accordance with the priorities set by the Standing Committee on Vaccination,” Cichutek said, referring to the group that makes recommendations for the use of licensed vaccines in Germany.
· Australia locks in coronavirus vaccine deal as new cases ease
A fresh outbreak of infections in Australia’s coronavirus hot zone of Victoria appeared to have eased on Wednesday, as the country signed a deal to secure a potential Covid-19 vaccine that it intends to roll out free of cost to its citizens.
Australia has signed a deal with British drugmaker AstraZeneca to produce and distribute enough doses of a potential coronavirus vaccine for its population of 25 million, Prime Minister Scott Morrison said late on Tuesday.
· South Korea records highest daily rise in coronavirus cases since early March
South Korea reported the highest daily rise in coronavirus cases since early March on Wednesday as an outbreak in the capital Seoul appeared to intensify.
The 297 new infections mark the sixth straight day of triple-digit increases in a country that has managed to blunt several previous outbreaks, bringing South Korea’s total to 16,058 infections with 306 deaths, health officials said.
Most of the new cases appeared in Seoul and the surrounding areas, raising concerns of a broader outbreak in a metropolitan area of more than 25 million people that has only seen small clusters so far.
· Oil slips as demand fears outweigh strong U.S. stocks draw
Oil prices eased on Wednesday as concerns grew that U.S. fuel demand may not recover quickly amid stalled talks on a post-coronavirus economic stimulus package, overshadowing a bigger-than-expected drawdown in U.S. crude stocks.
With investors keeping one eye on a key producer countries’ ministerial meeting later in the day, Brent crude futures fell 33 cents, or 0.7%, to $45.13 a barrel by 0418 GMT, having edged up 9 cents on Tuesday.
U.S. West Texas Intermediate crude futures were down 21 cents, or 0.5%, at $42.68 a barrel, having ended unchanged the previous day.
Reference: CNBC, Reuters
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