Dollar gains broadly on rising US-China tensions

The greenback ended the day higher against the majority of its peers on Friday ahead of long holiday weekend except for the Japanese yen as renewed tensions between U.S. and China triggered risk aversion. U.S. markets will be closed for Memorial Day holiday Monday.  
  
Reuters reported China is set to impose new national security legislation on Hong Kong after last year's pro-democracy unrest, a Chinese official said on Thursday, drawing a warning from President Donald Trump that Washington would react "very strongly" against the attempt to gain more control over the former British colony.    Trump, who has ratcheted up his anti-China rhetoric as he seeks re-election in November, told reporters "nobody knows yet" the details of China's plan. "If it happens we'll address that issue very strongly," he said.  
  
Versus the Japanese yen, although dollar gained to session highs at 107.76 in Asia, price swiftly erased its gains and tumbled to an intra-day low at 107.33 in early European morning on risk-averse buying of jpy on renewed U.S.-China tensions. The pair then rebounded to 107.65 in New York morning before retreating to 107.47 and last traded at 107.61 neat the close.  
  
Reuters reported the Bank of Japan decided on Friday to launch a new lending facility that aims to channel more funds to small and midsize businesses suffering from the economic blow of the coronavirus pandemic.    In an emergency policy meeting, the central bank also extended the deadline for a series of measures it has deployed to combat the virus fallout, including accelerated corporate debt buying, by six months to March 2021.    
As widely expected, the BOJ kept monetary settings unchanged including its short-term interest rate target of -0.1% and a pledge to guide the 10-year government bond yield around 0%.  
  
The single currency met renewed selling at 1.0959 in Australia and continued to ratchet lower in Asia on long-liquidation in euro together with riks off sentiment. Euro fell to session lows of 1.0886 in New York morning due partly to cross-selling vs sterling before moving narrowly in New York afternoon.  
  
In other news, Reuters reported the European Central Bank is ready to expand its Pandemic Emergency Purchase Scheme as early as June, if economic data warrant such a move, policymakers concluded in their April 30 meeting, the accounts of discussion showed on Friday.    "It (the Governing Council) was fully prepared to increase the size of the PEPP and adjust its composition, and potentially its other instruments, if, in the light of information that became available before its June meeting, it judged that the scale of the stimulus was falling short of what was needed," the ECB said.    
Policymakers agreed at the April meeting to provide loans at even more favourable terms but held back on big moves such as extending or expanding asset purchases, disappointing some market players.  
  
The British pound met renewed selling at 1.2233 in Asia and retreated to 1.2200 ahead of European open. Intra-day decline accelerated in early European trading after the release of weak UK retail sales data and hit session lows at 1.2161. However, price pared intra-day losses and staged a brief rebound to 1.2208 in New York morning due partly to cross-buying of sterling especially vs euro but later inched lower to 1.2164 at the close.   
  
Reuters reported British retail sales fell by the most on record in April as much of the sector was shuttered by the government's coronavirus lockdown, official figures showed on Friday.    Sales volumes fell 18.1% in April from March, a bigger fall than a median forecast for a drop of 16% in a Reuters poll of economists.  
  
Data to be released this week:

Japan leading indicator, coincident index, UK market holiday, Germany GDP. Ifo business climate, Ifo current conditions, Ifo expectation and U.S. market holiday on Monday.  
  
New Zealand imports, trade balance, exports, annual trade balance, Japan total industry activity, Germany GfK consumer sentiment, Swiss trade balance, exports, imports, non-farm payrolls, France business climate, UK CBI distributive trades and U.S. building permits, national activity index, monthly home price, CS home price, consumer confidence, new home sales, sales Fed manufacturing business on Tuesday.  
  
Australia construction work done, France consumer confidence, Swiss investor sentiment and U.S. MBA mortgage application, Redbook, Richmond Fed manufacturing on Wednesday.  
  
New Zealand NBNZ business outlook, NBNZ own activity, Italy production price, MFG business confidence, consumer confidence, trade balance, EU business climate, economic sentiment, industrial sentiment, services sentiment, consumer confidence, Germany CPI, HICP, U.S. Durable goods, Durables ex-transport, Durables ex-defense, GDP, core PCE prices, initial jobless claims, continued jobless claims, pending home index, KC Fed manufacturing, and Canada current account, average weekly earnings on Thursday.  
  
UK nationwide house price, GfK consumer confidence, Japan Tokyo core CPI, unemployment rate, industrial output, retail sales, construction orders, housing starts, consumer confidence, Germany import prices, retail sales, France GDP, CPI (EU norm), CPI, producer prices, Swiss KOF indicator, Italy GDP, consumer price, CPI, EU HICP, core HICP, U.S. personal income, core PCE price, goods trade balance, Chicago PMI, University Michigan sentiment and Canada GDP, producer prices, budget balance on Friday.