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Dollar notches small weekly gain after weak US data, threat of 2nd Covid-19 wave

New York

THE US dollar rose on Friday to notch a 0.66 per cent weekly gain as the threat of a second wave of novel coronavirus infections rattled investors as did a slew of bleak US economic data. The US dollar index attracted safe-haven bets on Friday after US retail sales endured a second straight month of record declines in April as the novel coronavirus pandemic kept Americans at home, putting the economy on track for its biggest contraction in the second quarter since the Great Depression.

The dollar index was up 0.13 per cent on Friday afternoon to 100.4 and was flat against the Japanese yen, another primary safe-haven currency. Although investors moved out of risk assets on Friday morning, the S&P 500 index and Dow Jones Industrial Average ended the day slightly up.

The collapse in retail sales reported by the Commerce Department on Friday added to the historic loss of 20.5 million jobs last month.

Federal Reserve chair Jerome Powell on Wednesday warned of an "extended period" of weak growth and stagnant incomes.

"The US dollar looks set to cap the week on a high note. It's also the best performing asset over the past month, which is also interesting since it parallels with a good showing of the MSCI China index," said Mark McCormick, global head of foreign exchange strategy at TD Securities.

New Covid-19 infections have been recorded in countries that have eased stay-at-home restrictions, denting earlier investor optimism that economies could get back to close to normal soon. "On a worldwide level, we think markets may be finally coming around to the belief that there's no V-shaped recovery in the offing," said Mr McCormick. "Of the countries we track, 100 per cent of them have seen their GDP forecasts downgraded for the coming year."

The euro was last 0.08 per cent stronger against the dollar at US$1.081. The pound remained under pressure, falling 0.91 per cent to US$1.211, its lowest since March 26, after the European Union's Brexit negotiator Michel Barnier on Friday called a third round of talks with Britain on a new partnership "disappointing". REUTERS

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