US$ dips after 'potentially positive' Covid-19 data

London

THE US dollar dipped on Tuesday after the World Health Organization said some treatments appear to be limiting the severity or length of the Covid-19 respiratory disease.

Even a small hint of positive coronavirus news limits the US dollar's appeal as a safe-haven currency as investors eye riskier assets, though declines were kept in check by growing fears of a second wave of coronavirus infections.

The US currency was also supported by the Federal Reserve playing down the likelihood of negative US interest rates, boosting the US dollar's yield attraction.

Fed policymakers say they will do what it takes to cushion an economy crushed by widespread lockdowns aimed at slowing the spread of the coronavirus but are likely to stop short of negative interest rates.

New coronavirus infections have been found in China, South Korea and Germany, where respective governments have eased lockdown restrictions.

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A re-emergence of coronavirus cases could dent a global economic recovery on the back of an injection of monetary and fiscal stimulus.

German economic output is likely to have declined by 20-25 per cent for several weeks during the coronavirus outbreak, the KfW state development bank said on Tuesday.

The euro was last up 0.2 per cent against the US currency at US$1.0830, though still not too far from the US$1.0636 low touched at the end of March when the pandemic sent markets into turmoil.

The Japanese yen rose 0.2 per cent to 107.44 against the US dollar.

The Australian dollar was the biggest mover in Asian trading, dipping to a five-day low of 0.6432 after China banned some Australian meat imports. It later pared losses as Australia's trade minister played down the issue as a technicality and was last trading up 0.3 per cent.

The greenback was broadly supported by the possibility of US President Donald Trump instructing a federal pension fund not to buy Chinese equities, making investors cautious on US-Sino relations.

The White House on Monday named three nominees to sit on a board that oversees federal employee pension funds, raising the potential for the reversal of a decision to allow one of the funds to invest in Chinese companies under scrutiny from Washington.

Mr Trump also said he opposed a reopening of so-called Phase One trade negotiations after China's state-run Global Times floated the idea on Monday. REUTERS