US$ rises, yen falls behind as more countries ease lockdowns

London

THE dollar rose on Monday as investors worried that economic recovery might be slower than hoped and sought the safety of the US currency even though more countries eased Covid-19 lockdowns. The dollar was broadly flat overnight but rose in early London trading as investors adjusted their risk expectations with an eye on warnings of a second wave of Covid-19 infections.

Japan said on Monday it could end its state of emergency in many regions this week and New Zealand said it could ease restrictions on Thursday. The UK has also set out plans to ease the lockdown while in France shops re-opened on Monday.

South Korea warned of a second wave of the virus as infections rebounded to a one-month high and new infections have also accelerated in Germany.

"More of a risk-off tone has taken over at the start of this week," said Lee Hardman, currency strategists at MUFG, who said that there were some concerns that the re-opening of economies in places such as Germany may have led to a pick-up in infection rate.

Against a basket of comparable currencies, the dollar was last up 0.3 per cent since New York's close, at 100.09.

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The safe-haven Japanese yen hit a 10-day low versus the dollar, down around 0.6 per cent, after a US buyer bought a large amount of dollar-yen, forcing the pair above 107.

Also weighing on global risk sentiment is the prospect of worsening tensions between the US and China.

A conciliatory phone call between US and China trade negotiators on Friday staved off fears of an imminent new round of US tariffs. But US President Donald Trump said he was "very torn" over whether or not to end the preliminary phase one trade deal between the two countries.

On Monday, China warned that it will take countermeasures in response to a US decision to tighten visa terms for Chinese journalists. This news did not move the market, analysts said.

The euro fell against the dollar, last down around 0.3 per cent at US$1.08165. "Developments in the euro area keep eurozone equities and banks underperforming versus the rest of the world, which does not help the euro," Morgan Stanley analysts wrote in a note to clients.

The riskier Australian dollar was down 0.7 per cent versus the US dollar, while the New Zealand dollar was down 0.9 per cent having fallen from around 0400 GMT.

The Swedish kronor fell around 0.5 per cent against the dollar, weakening to as much as 9.8150, also down around 0.2 per cent against the euro, at 10.5985.

Minutes from the Riksbank's latest meeting, published on Monday, showed that Swedish rate-setters were united on seeing balance sheet measures as currently the best way of conducting policy amid the outbreak of the novel coronavirus. REUTERS