By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The dollar rallied from a four-week low in choppy trading on Thursday, enhancing the greenback’s safe-haven appeal, as U.S. stocks fell with market sentiment turning cautious as the United States hit another record high on new coronavirus cases.
The euro, meanwhile, fell from a one-month high versus the dollar, while commodity currencies, which tend to rise when there’s higher risk appetite also slid against the greenback.
Some analysts said dollar sentiment turned higher after the U.S. Supreme Court on Thursday ruled that a New York prosecutor can obtain President Donald Trump’s financial records but prevented – at least for now – the Democratic-led House of Representatives from obtaining similar documents.
Earlier in the global session, the dollar struggled, with the Chinese yuan climbing to a four-month peak as investors increased positions in Chinese stocks due to growing signs of a recovery in the world’s second-largest economy.
Risk sentiment turned, however, during the U.S. session. Another contributing factor, apart from the Supreme Court decision, was the renewed surge in COVID cases.
More than 60,000 new COVID-19 infections were reported on Wednesday and U.S. deaths rose by more than 900 for the second straight day, the most since early June.
U.S. stocks fell on Thursday, a day after hitting a record closing high. The dollar continues to negatively correlate with stocks and risk appetite.
Analysts believed though that despite losses in the S&P 500 <.SPX> and the Dow Jones Index <.DJI>, they are still well-supported on dips.
“The risk backdrop should remain more or less positive for the foreseeable future, given the global fiscal and monetary policy setting – though we do not exclude the risk of more volatility late in the summer or early fall as markets start to factor in the U.S. presidential election,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
In late morning trading, the dollar index rose 0.2% to 96.668 <=USD>, after earlier falling to a four-week low of 96.233.
The euro dropped 0.3% to $1.1296, not that far from a one-month high around $1.1371 it hit earlier in the day <EUR=EBS> even after German export data failed to meet analysts’ expectations.
The dollar was flat against the yen at 107.255 yen <JPY=EBS> and was up 0.2% versus the Swiss franc <CHF=EBS>.
The Chinese yuan soared to a four-month high of 6.9808 in the offshore market and was last up 0.2% against the dollar at 6.9830 <CNH=EBS>. (Graphic: Yuan strengthens, https://fingfx.thomsonreuters.com/gfx/mkt/dgkplxzwrpb/Yuan%20strengthens.png)
China’s currency has been a star performer as investors shrug off diplomatic tension between Washington and Beijing to focus on China’s improving economy and its attractive technology sector.
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Olga Cotaga in London; Editing by Andrea Ricci)
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