US$ falls against yen while sterling dips on Covid-19 worries

New York

THE US dollar lost ground to Japan's yen for the fifth straight day and the yen was at a seven-week high against the greenback on Friday as investors sought safety amid concerns about a resurgence in Covid-19 cases in Europe and a lack of progress in US fiscal stimulus talks. Strategists also cited investor nerves ahead of the Nov 3 US election and US-China tensions as the dollar index registered its first weekly decline since August.

Sterling fell after Britain discussed negative rates and signalled that it was considering a second national lockdown as new Covid-19 cases almost doubled while hospital admissions rose and infections soared in London and northern England.

There has been "a wave of risk aversion" due to growing concerns about the fight with Covid-19, said Edward Moya, senior market analyst at OANDA in New York. "Europe seems to be losing its battle right now," he said. "You're having a lot of downbeat news as far as reopening of the economy and this is likely to weigh on risk appetite." While the euro was virtually unchanged against the dollar at US$1.1851, it was down for its fourth day out of five against Japan's currency, last trading at 123.90 yen.

The dollar, after falling to 104.27 yen earlier in the session - its lowest level against Japan's currency since July 31 - last traded at 104.53, down 0.19 per cent on the day.

While the dollar was basically flat on the day against a basket of currencies, it showed a weekly decline after two weeks of gains.

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Along with politics, Japan's policy of yield curve control was also a factor as it was pushing up real interest rates, said Boris Schlossberg, managing director of FX strategy at BK Asset Management.

"Japanese market conditions are much tighter than they seemingly appear despite QE from the Bank of Japan," said Mr Schlossberg. "That's creating a distinct and significant tilt towards the yen."

While US equities have kept close to their record highs, Mr Schlossberg said dollar weakness may signal more volatility to come ahead of the Nov 3 US elections. He also pointed to heightening US-China tensions.

While strong British consumer spending had helped sterling earlier, it was last down 0.33 per cent at US$1.2929. REUTERS