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Dollar Regains Ground as Coronavirus Spreads Globally

By Ritu,

Capital Sands

The dollar started the new year where it left the old one, under pressure as investors wagered U.S. economic out performance could be coming to an end as optimism on trade brightens the outlook for growth globally.

Signs of progress in the Sino-U.S. trade dispute undermined the dollar for much of December, leaving its index  down 1.9% on the month. It was flat on Thursday at 96.440 having touched a six-month trough ahead of the holidays.

The euro edged up to $1.1220 , after gaining 1.8% in December to reach its highest since early August. It now looks set to challenge that August peak at $1.1249.

The dollar looked like slipping further on the Chinese yuan after shedding 1% last month to stand at 6.9640 . It was also finely poised on the yen at 108.67 , just a whisker from the December lows and major support around 108.40.

The dollar had benefited from U.S. economic out performance for much of 2019, but an easing in Sino-U.S. trade concerns has boosted optimism that this year could favor other major nations.

While activity was light on Thursday, traders were on watch for any repeat of last January’s “flash crash” when massive stop-loss selling swept through an liquid holiday-hit market.

There are fears the same could happen this week with Tokyo off and Japanese retail investors again heavily short of yen and long of risky high-yielding currencies, including the Turkish lira and the South African rand.

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