Dollar holds advantage as anxiety grows over rise in coronavirus cases
By Stanley White
TOKYO (Reuters) – The dollar held onto gains on Thursday as growing concerns about a rise in coronavirus cases underpinned safe-haven demand for the U.S. currency.
The British pound traded in a narrow range before a Bank of England meeting where policymakers are expected to expand quantitative easing in the face of a stuttering economy and rocky trade negotiations with the European Union.
A surge in new coronavirus infections in several U.S. states and the imposition of travel curbs in Beijing to stop a separate outbreak have served as a reminder that the pandemic could be a severe drag on the global economy for a protracted period.
“Upside for U.S. stocks and other risk assets has dwindled because more people are talking about a second wave of virus infections,” said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.
“This supports the dollar and the yen because they are both safe havens. The pound has its own problems. The British economy is not in good shape and a hard Brexit remains a risk.”
The dollar traded at $1.1240 per euro on Thursday in Asia following a 0.2% gain in the previous session.
The greenback bought 0.9489 Swiss franc, holding onto a 0.3% gain on Wednesday.
The yen edged up to 106.81 against the dollar.
Sterling inched down to $1.2547, on course for a third day of losses. Against the euro, the pound was little changed at 89.60 pence.
A spike in new coronavirus infections and hospitalisations in several parts of the United States over the last two weeks points to a troubling trend because cases had been falling for more than a month.
China’s capital has cancelled scores of flights and blocked off some neighbourhoods to contain a coronavirus outbreak that has fanned fears of wider contagion.
The situation in both the United States and China has raised fresh concerns about the risks of re-opening economic activity before a vaccine has been developed.
The Australian dollar traded at $0.6878, extending a pull back from a one-year high reached last week.
Many traders in the Aussie kept to the sidelines before the release of Australian jobs data later on Thursday.
Across the Tasman Sea, the New Zealand dollar eased slightly to $0.6449 after data showed the economy shrank more than expected in the first quarter.
The British pound got off to a quiet start in Asia but will come into focus later in the day as traders brace for the Bank of England’s policy meeting.
The BOE is expected to boost its quantitative easing programme by 100 billion pounds ($125 billion), with some analysts eyeing an even larger increase amid concerns about the economic outlook.
Britain is seeking a free trade agreement with the EU, which it left on Jan. 31, but negotiators have so far made little progress, raising the risk both sides will fail to agree a deal before a deadline at the end of the year.