Dollar pares losses on doubts over Moderna's vaccine

Market Review - 20/05/2020  00:12GMT  

Dollar pares losses on doubts over Moderna's vaccine

Although the greenback remained on the back foot in Asia and Europe, except versus the Japanese yen, dollar pared its losses in New York on safe-haven usd buying after STAT News reported that vaccine experts said Moderna did not produce data critical to assessing COVID-19 vaccine.  
  
Reuters reported in a sometimes testy hearing before the Senate Banking Committee, U.S. Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell said the nearly $3 trillion in federal rescue programs rolled out over the past two months were working to support an economy devasted by the novel coronavirus.    Mnuchin warned prolonged lockdowns would pose a "risk of permanent damage" to the economy.  
  
Versus the Japanese yen, dollar traded with a firm bias in Asia due to a rally in Japanese stocks on improved risk appetite due to encouraging results from a COVID-19 vaccine trial. The pair continued to ratchet higher in Europe after Bank of Japan announced emergency policy meeting and rose to a 1-month peak at 108.08 in New York morning before retreating to 107.69 on fall in U.S. Treasury yields and stocks following STAT News report.  
  
Reuters reported the Bank of Japan said it will hold an emergency policy meeting on Friday to sign off on a new lending programme to help firms combat the fallout from the coronavirus crisis.     The emergency policy meeting will be held from 9 a.m. (0000 GMT) on Friday, the central bank said in a statement on Tuesday.   
  
Although the single currency dropped to session lows at 1.0903 in Asian morning, price erased its losses and resumed Monday's winning streak and rallied to an intra-day high at 1.0976 in European morning on continued optimism over Franco-German proposal for a recovery fund together with upbeat German and EU ZEW sentiment data. The pair then retreated to 1.0919 near New York close on renewed usd's strength.  
Reuters reported the ZEW research institute said its German monthly survey showed economic sentiment among investors rose to 51.0 from 28.2 in April. Economists had expected a reading of 32.0.    
  
The British pound also dropped in tandem with euro to session lows at 1.2185 in Asian morning before rising to 1.2268 at European open due partly to cross-buying of sterling especially vs euro. Cable then retreated to 1.2220 in European morning on profit-taking before ratcheting higher to 1.2296 in New York but only to weaken to 1.2235 near the close on buying in usd.  
  
In other news, Reuters reported the Franco-German idea that the European Union should borrow to issue grants for its economic recovery is a historic step as it would be the first time that budget spending is financed through EU debt, French Finance Minister Bruno Le Maire said.    France and Germany proposed on Monday a 500 billion euro fund, financed through European Commission borrowing on the market, to issue grants to EU regions and sectors worst hit by the coronavirus pandemic to help them recover.  
  
On the data front, Reuters reported a measure of the number of people claiming unemployment benefits in Britain soared in April, the first full month of the government's coronavirus lockdown, data published on Tuesday showed.    The claimant count rose by 856,500 to 2.097 million, the Office for National Statistics said.    A Reuters poll of economists had produced a median forecast for a leap of 676,500 in the claimant count with forecasts ranging widely from just over 56,000 to as high as 1.5 million.    The ONS also said Britain's unemployment rate fell to 3.9% in the January-March period, covering only one week of the lockdown, from 4.0% in the three months to February.  
  
Data to be released on Wednesday:  
  
New Zealand food price index, Japan machinery orders, Australia westpac leading index, UK core CPI, CPI, RPI inputs, RPI outputs, PPI core outputs, EU current account, HICP, core HICP, consumer confidence U.S. MBA mortgage application and Canada CPI, CPI BOC core, core CPI.