Dollar down against most major currencies

London

THE dollar fell on Tuesday after better-than-expected economic data from China which painted a less gloomy picture than feared following the novel coronavirus epidemic there and gave a boost to sterling and the Australian dollar.

China's March exports fell 6.6 per cent from a year earlier, compared with a forecast for a 14 per cent drop, while imports fell by less than 1 per cent, compared with a 9.5 per cent drop predicted by economists.

Daily fatalities in the United States also fell sharply and states began making plans to reopen their economies, leaving traders to abandon the safety net of the highly liquid dollar and turn to riskier currencies.

The Australian dollar, which is sensitive to Chinese demand because of the country's dependence on raw materials exports, rose to a more than one-month high of 0.6432 per US dollar but was last trading flat at 0.6382.

Sterling, whose performance is closely linked to that of Britain's FTSE 100 stock index, many of whose members are dollar earners, went up by the same magnitude, touching US$1.2575, its highest since March 13, and was last up 0.3 per cent at US$1.2535 .

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The euro inched higher by 0.3 per cent to US$1.0945.

The Japanese yen rose versus the greenback to a two-week high of 107.38 yen.

"The ongoing improvement in global investor risk sentiment in the near-term combined with the Fed's aggressive policy response is beginning to weigh down more on the US dollar," said Lee Hardman, currency analyst at MUFG.

The mood in the forex markets was pre-empted by leveraged funds, whose net short US dollar positioning in the latest week touched its largest level since May 2018, according to calculations by Reuters and US Commodity Futures Trading Commission data released on Friday.

The value of the net short dollar position was US$10.5 billion in the week ended April 7, from net shorts of US$9.9 billion the previous week. Speculators have been short on the US dollar for four consecutive weeks.

Last week, the US Federal Reserve rolled out a US$2.3 trillion effort to bolster local governments and small and mid-sized businesses in its latest move to keep the US economy intact as the country battles the novel coronavirus pandemic.

The Fed's latest efforts have added to current dollar weakness, analysts say.

"Can the dollar avoid a major cyclical turn in the coming months, with the Fed doing so much of the fiscal authorities' work for them?" said Kit Juckes, macro strategist at Societe Generale. REUTERS