US dollar stabilises, riskier currencies remain subdued

London

THE US dollar edged up slightly on Thursday and riskier currencies remained subdued, with markets worried about Europe's second wave of coronavirus infections, and cautious ahead of the European Central Bank (ECB)'s meeting.

Rapidly rising Covid-19 infection rates in Europe, along with caution ahead of the US elections, triggered the worst market sell-off since June earlier this week.

France and Germany ordered their countries back into lockdown, after Europe's death rate jumped 37 per cent last week.

Implied volatility gauges with a one-week maturity for currency pairs such as euro-dollar and dollar-yen, rose to their highest in more than six months on Wednesday, and remained elevated on Thursday.

The US dollar, which hit a nine-day high in the previous session, held steady overnight and strengthened further in early London trading.

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The dollar index measured against a basket of currencies was up 0.1 per cent on the day at 0818 GMT, 4.18pm Thursday, Singapore time.

The ECB is expected to hold off with new stimulus measures this week, but is likely to signal more action in December.

At 4.23pm Thursday, Singapore time, the euro was down 0.1 per cent against the US dollar at US$1.173.

ING's chief EMEA FX and IR strategist, Petr Krpata said the euro has been resilient despite the euro-specific negative news such as the second wave in Europe, downgrades to eurozone growth outlook and market expectations of further easing in December.

Against the yen, the euro held near a three-month low, down 0.2 per cent on the day at 122.29 yen.

The yen was broadly steady against the US dollar at 104.250 after the Bank of Japan trimmed its economic growth and inflation forecasts, but, as expected, made no changes to its monetary policy.

The riskier Australian and New Zealand dollars recovered some of Wednesday's losses during the Asian session, but fell again in early London trading.

China's offshore yuan was up 0.3 per cent on the day at 6.7111 to the US dollar.

China's major state-owned banks have been swapping US dollars for yuan this week, traders said on Thursday, suggesting monetary authorities were trying to rein in the currency.

The onshore yuan has appreciated 7 per cent against the US dollar since the depths it hit in May. REUTERS