THE US dollar strengthened on Thursday, as risk appetite faded, with jobs data due in the United States and lawmakers in Washington still unable to agree on a new financial aid package.
Risk appetite had grown on Wednesday after Institute for Supply Management (ISM) data in the US showed that new service industry orders jumped to a record high. But the data also showed that hiring declined, suggesting a labour market recovery is faltering.
The US dollar fell against a basket of currencies overnight, reaching a two-year low of 92.495 at 2.08pm Thursday, Singapore time, then picked up by 6.01pm Thursday, Singapore time, to trade 0.1 per cent lower on the day at 92.821.
Euro-US dollar reached a two-year high of US$1.1916 towards the end of the Asian session before slipping back to US$1.1859. The euro was boosted by purchasing managers' index data on Wednesday that showed the euro zone economy starting to expand.
Analysts worried that programmes to support the economy, such as unemployment benefits, are covering up the underlying damage to the economy.
Investors were waiting for lawmakers to agree on a new package of government support for the US. With no sign of an agreement in sight, Republicans and Democrats remained trillions of dollars apart.
The US said it was stepping up its campaign against "untrusted" Chinese apps in US digital networks, which contributed to investor caution.
The offshore Chinese yuan, which hit a five-month high on Wednesday versus the US dollar, weakened as the US dollar rebounded and was at 6.9450 on Thursday.
The riskier Aussie and Kiwi dollars strengthened overnight but fell as the US dollar started to recover.
The Swedish krona and Norwegian krone fell versus the US dollar, having changed direction after the Swedish krona rose to its strongest since mid-2018 at the end of the Asian session. The Swiss franc rose against the euro and US dollar as markets turned more cautious. Versus the US dollar, it was at 0.90805, close to its highest in five years.
In emerging markets, Turkey's lira hit a record low against the euro and slid 2.7 per cent against the US dollar. Analysts warned of inflation and predicted state attempts to aid the currency would struggle. REUTERS