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Dollar Up, But Gains Limited Over Slow U.S. COVID-19 Recovery

imageForex11 hours ago (Aug 02, 2020 10:09PM ET)

(C) Reuters.

By Gina Lee – The dollar was up on Monday morning in Asia but saw gains capped as the U.S. economic recovery from COVID-19 slows down.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies gained 0.11% to 93.535 by 9:47 AM ET (2:47 GMT).

Minori Uchida, chief currency analyst at MUFG Bank, told Reuters that the greenback hit a speed bump as there were some technical signs of being over-bought in the near-term and with speculators’ long position hitting a record level.

“But the dollar’s decline is likely to continue. Real U.S. interest rates are declining even as the country is running a big current account deficit, a situation we hadn’t have for a long time,” he warned.

Gains were also capped by Republicans and Democrats in the U.S. failing to reach a consensus over the latest stimulus measures, after some previous measures expired on Friday. White House Chief of Staff Mark Meadows told CBS on Sunday, “I’m not optimistic that there will be a solution in the very near term,” but both sides will continue negotiations for the bill this week.

The USD/JPY pair was up 0.16% to 106.05.

The AUD/USD pair fell 0.29% to 0.7122, with the Australian dollar feeling the impact as the state of Victoria declaring a state of disaster on Sunday and tightened existing lockdown measures after reporting 671 cases. Across the Tasman sea, the NZD/USD pair was down 0.14% to 0.6623.

The USD/CNY pair gained 0.03% to 6.9767. China reported a better-than-expected Caixin Manufacturing Purchasing Managers Index (PMI) of 52.8 earlier in the day, higher than the official manufacturing PMI of 51.1 released on Friday. Both PMI readings were above the 50-mark indicating expansion.

Meanwhile, U.S.-China tensions simmered over the weekend after U.S. President Donald Trump threatened to ban popular video app TikTok, which is owned by Chinese tech company ByteDance, on Friday. Secretary of State Michael Pompeo also said on Sunday that the U.S. will act shortly on Chinese software companies that are providing data directly to the Beijing government, thus posing a risk to U.S. national security.

The GBP/USD pair was down 0.05% to 1.3082.

Dollar Up, But Gains Limited Over Slow U.S. COVID-19 Recovery

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