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US dollar and yen gain on worries about virus and economic outlook

The US dollar and the yen edged higher on Thursday as growing concerns about a rise in coronavirus cases underpinned safe-haven demand for both currencies.

[TOKYO] The US dollar and the yen edged higher on Thursday as growing concerns about a rise in coronavirus cases underpinned safe-haven demand for both currencies.

The Australian dollar fell after data showed its economy shed twice as many jobs as expected in May, highlighting the damage caused by lockdown restrictions put in place by the government to contain the outbreak.

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 US 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 US 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.

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"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 US dollar traded at US$1.1234 per euro on Thursday in Asia following a 0.2 per cent gain in the previous session.

The greenback bought 0.9496 Swiss franc, holding onto a 0.3 per cent gain on Wednesday.

The yen edged up to 106.79 against the US dollar.

Sterling inched down to US$1.2533, on course for a third day of losses. Against the euro, the pound was little changed at 89.66 pence.

A spike in new coronavirus infections and hospitalisations in several parts of the US 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 US and China has raised fresh concerns about the risks of re-opening economic activity before a vaccine has been developed.

The onshore yuan held steady at 7.0883 per US dollar.

The People's Bank of China on Thursday cut the rate on 14-day reverse repurchase agreements to 2.35 per cent from 2.55 per cent and injected 70 billion yuan (S$13.8 billion) into the money market to boost liquidity. 

The Australian dollar fell 0.4 per cent to US$0.6854, extending a pull back from a one-year high reached last week after data showed the Australian economy shed a quarter of a million jobs and the jobless rate jumped to the highest in almost two decades in May.

Across the Tasman Sea, the New Zealand dollar also fell to US$0.6432 on equally grim data, which showed the economy shrank more than expected in the first quarter. 

The yen jumped by more than half a per cent against the Aussie and the kiwi, reinforcing the heightened risk aversion.

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 (S$175 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.


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