US$ edges up as risk appetite is tempered

London

The US dollar edged up on Friday but was set for its biggest weekly fall since the start of June, as a sentiment boost from better-than-expected jobs data in the United States was tempered by surging coronavirus cases.

The US Labor Department said on Thursday that payrolls surged in June but the reaction in currencies was limited. Even after two months of job recovery from May, the US economy has regained just over a third of an historic plunge of 20.787 million jobs lost in April.

Broader market sentiment improved as Asian shares rallied to a four-month high overnight following a brisk pick-up in Chinese service sector activity.

Against a basket of currencies, the dollar rose less than 0.1 per cent, to 97.249 at 1353 GMT. Friday saw its biggest daily gains this week but it is still on track for its biggest weekly fall since the first week of June.

"In a week characterised by dropping FX volatility, the dollar looks to be re-establishing a gentle bear-trend as equities keep showing complacency to grim contagion news," FX strategists at ING wrote in a note to clients. "Such complacency still indicates the short-term outlook for risk assets is not lacking hurdles, but there is still a material chance we have seen the peak in the dollar."

Riskier currencies edged up, with the New Zealand dollar up 0.3 per cent at 0.6528 versus the US dollar and the Australian dollar up 0.2 per cent at 0.69395.

The Norwegian crown rose around 0.5 per cent versus the dollar, at 9.487, on track for its best week since the first week of June.

The euro was little changed against the US dollar, at 1.1237. It gained against the safe-haven Swiss franc and fell versus the commodity-driven Norwegian crown.

Traders have been balancing hopes for an economic recovery with surging coronavirus infections, particularly in the US, where infections are rising in the majority of states.

"We are surprised about an emerging consensus that a much-faster-than-expected recovery justifies support for risk assets. What we see in the latest data is just base effects, as economies exit the lockdown," Bank of America FX strategists Michalis Rousakis and Rohit Garg said in a note.

"We would expect global output to stabilise soon to well below pre-crisis levels. This is not a V," they added. REUTERS

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