Dollar Unloved; Mood Remains Optimistic

Tuesday,   02-Jun-2020   01:22 PM (IST)

The dollar has few friends in early European trade Tuesday, as the tone remains generally optimistic about the global recovery despite heightened concerns over U.S.-China tensions and civic unrest in many U.S. cities. At 3:25 AM ET (0725 GMT), the U.S. Dollar Index, which tracks the greenback against a basket of six other currencies, stood at 97.793, largely flat on the day, having earlier fallen as low as 97.73, its lowest level since mid-March. USD/JPY rose 0.2% to 107.77. Earlier Tuesday, Australia’s central bank kept its interest rate and yield objectives unchanged amid early signs of a recovery. The Australian dollar, often seen as a proxy bet on the strength of the Chinese economy, rose 0.1% to fetch $0.6802, having reached its highest levels since late January. This follows U.S. manufacturing activity easing off an 11-year low in May, feeding into the narrative of an economy turning upwards. This has overshadowed continued violent protests in many U.S. cities over alleged police brutality as well as renewed hostility between China and the U.S. over China’s treatment of Hong Kong’s special status. The euro has retained its recent strength Tuesday, having been boosted by last week’s EU stimulus package, and ahead of Thursday’s meeting of the European Central Bank, where it is widely expected to raise its asset buying by around 500 billion euros to 1.25 trillion. It's also being supported by reports of another German government stimulus package, due to be debated later Tuesday by Chancellor Angela Merkel's cabinet. The EUR/USD fetched $1.1126, little changed so far on Tuesday but holding near a 2-1/2-month high of $1.1154 touched on Monday. GBP/USD traded at $1.2532, having already hit a one-month high of $1.2554, as the U.K. loosens months-long lockdown measures, while another round of Brexit talks get underway on Tuesday.