Dollar set for biggest weekly gain in a month
The dollar paused on Friday but remained on track for its biggest weekly gain in a month amid growing market caution over a global surge in coronavirus cases and fading prospects of a U.S. stimulus package before the Nov. 3 election. Fresh curbs to combat COVID-19 have been introduced across Europe while the U.S. Midwest is also battling record spikes in new cases as data shows the country's economic recovery is losing steam.
Investors will get a further indicator of the health of the U.S. economy with retail sales data due later on Friday. Relief plans remain bogged down in a three-way negotiation between the White House, Senate Republicans and House Democrats. The dollar and Japanese yen are both on track for weekly gains on investor appetite for safe haven assets, of 0.7% and 0.4% respectively. =USDJPY=EBS
The greenback hugged a tight range in morning trading in Europe on Friday, with the dollar index last down 0.1%. The euro strengthened slightly, last up 0.1%. EUR=EBS
On a monthly basis, the dollar index is up 0.7%, its biggest rise since endSeptember. "The fight against corona is not a sprint but a marathon and that is becoming increasingly clear on the FX market too," said Esther Reichelt, FX analyst at Commerzbank, in a note. "The winners will be all those economies and their respective currencies that do best at overcoming the economic challenges posed by the pandemic...Until then, the FX market will be dominated by risk considerations."
Sterling gained around a third of a percent as markets waited for British Prime Minister Boris Johnson to set out his response to the European Union's demand for more concessions in Brexit talks. GBP=D3He had previously set Oct. 15 as a deadline for a deal to be reached.
The onshore yuan extended gains on Friday to end the domestic trading session at an 18-month high of 6.6982 against the dollar, underpinned by promising recent economic data.
Trade and credit lending data this week suggested the world's No.2 economy was recovering faster than expected from the coronavirus shock. Market participants are now waiting for third-quarter GDP data, due next Monday, for more trading cues.
China's economy is expected to have grown 5.2% in July-September from a year earlier, faster than the second quarter's 3.2%, a Reuters poll shows. "With the nation leading in the recovery, China's GDP, retail sales and industrial production data will be critical to the confirmation of the resilience seen in Asia/dollar," ANZ said in a note.
Some currency traders said their corporate clients showed rising interests in liquidating long-dollar positions on Friday to limit exchange losses as they expect the yuan to rise further.
"The yuan continues to power ahead, driven by stock and bond inflows, as the USD/CNH shifts back into maximum down channel overdrive," Stephen Innes, chief global markets strategist at AxiCorp said in a note.