Improving investor sentiment lifts euro

London

THE euro got a boost on Tuesday from a weaker US dollar as growing optimism about a global economic recovery from the Covid-19 pandemic supported riskier currencies, though Sino-US tensions kept the mood in check.

The trade-sensitive Australian and New Zealand dollars each rose more than 1 per cent versus the US dollar.

The Chinese yuan, a barometer of US-China relations, was mostly left behind by a rally in other Asian currencies.

"At the moment, the euro is torn between political risks on the one hand and positive sentiment on the markets as a result of further easing of the corona-related restrictions on the other. This morning, the latter is dominating, allowing it to appreciate against the dollar," said Thu Lan Nguyen, a currency analyst at Commerzbank.

"However, in view of the continued disagreements within the EU about a corona-recovery fund, the single currency is likely to run out of steam quite quickly in euro-dollar," she said.

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The euro was last up 0.6 per cent at US$1.0960, having rallied to US$1.0973, its strongest since Thursday, while the US dollar was down by 0.5 per cent against a basket of currencies at 99.21.

The mood among German exporters recovered somewhat in May after a "catastrophic" April, the first full month of coronavirus lockdown measures in Europe's largest economy, the Ifo institute said on Tuesday.

Japan ended its state of emergency on Monday, while Britain said it will re-open thousands of shops, department stores and shopping centres next month.

Versus the Japanese yen, the US dollar rose was flat at 107.65.

"Investors remain in risk-seeking mode, encouraged by ongoing progress in suppressing Covid-19, which is allowing the gradual reopening of economies," said Lee Hardman, currency strategist at MUFG.

"At the same time, the unprecedented amount of monetary and fiscal stimulus that has been put in place in recent months is providing support for risk assets," he said.

The Australian dollar was last up 1.3 per cent at 0.6626, an 11-week high. The New Zealand dollar also rose 1.3 per cent to 0.6184, also an 11-week high.

Sterling traded up 1 per cent at US$1.2326, a two-week high. Against the euro, the recovery was more moderate, up 0.4 per cent at 88.99 pence. The Chinese yuan was last trading up 0.1 per cent in the offshore market at 7.1404. REUTERS