SINGAPORE- The dollar began the week under pressure from all corners as intensifying Sino-US tensions added to worries that the coronavirus resurgence in United States could undermine the recovery in the world’s biggest economy.
In morning trade it fell to a four-month low against the yen and a new 22-month trough on the euro at $1.1699.
The Antipodean currencies also rose a little and against a basket of currencies the dollar was at its lowest since September 2018.
The lack of support for the greenback, even as tit-for-tat consular closures marked the latest escalation in US-China tensions, is a shift for the dollar which has been closely tracking global sentiment through the coronavirus crisis.
It also comes with a broad re-evaluation of the euro’s value after a landmark European agreement on a fiscal rescue package just as cracks start to emerge in the US labour market rebound.
“The common factor is the ongoing decline in US yields,” said Ray Attrill, head of FX strategy at National Australia Bank in Sydney. They have fallen as the bond market prices a slow US recovery, robbing the dollar of a dependable attraction.
“The message from the end of last week is that deterioration in risk sentiment alone may not be enough to provide the dollar with any kind of meaningful, durable support,” Attrill said.
“I suspect it’s going to take much more (deterioration in sentiment) to really bring the dollar’s reserve-currency safe-haven characteristics back to the fore.”
The Australian dollar took advantage and edged ahead in spite of a rise in local coronavirus cases, climbing to $0.7120. The New Zealand dollar rose 0.3 percent to $0.6657.
Both, however, remain below recent peaks and were under pressure against the yen as the broader mood remained grim in the shadow of rising infections and simmering geopolitical tensions.