TOKYO: The US dollar started the week with a soft tone on Monday (Jul 13) as investors looked to looming economic data from around the world and US corporate earnings to gauge whether the markets’ guarded optimism on the economic outlook is justified.
The greenback ended its third week of losses on Friday as investors bought into risk-sensitive currencies on bets that the worst of the pandemic’s sweeping impact was over.
The dollar index against a basket of currencies stood at 96.586, down slightly after having lost about 0.5 per cent last week.
US coronavirus cases continued to surge over the weekend, as Florida reported an increase of more than 15,000 new cases of COVID-19 in 24 hours, a record for any state, surpassing a peak hit in New York in April.
“Rising coronavirus cases are not positive but at the moment, markets seem to think that there is still some distance to a situation where an overflow of the medical system will force them to put restrictions on the economy,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
Hopes for development of drugs and vaccines for the disease are also supporting risk sentiment as do economic indicators that have so far shown a recovery from lockdowns.
“We’ve seen a rapid rebound after a rapid decline in various economic data. But looking ahead, the improvement could slow or we could even seen a deterioration given the second infections,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
A weekly gauge of consumer confidence in Australia has dropped after a spike in infections in Melbourne and that could be repeated in the US, where the magnitude of the outbreak is much larger, he noted.
US consumer inflation figures for June are due on Tuesday while retail sales, a key gauge of consumption, are released on Thursday.
US corporate earning season will start this week, providing another window to assess the scale of the damage as well as the recovery, from the pandemic.
Investors also looked to China, where economic recovery is gaining momentum as the outbreak has largely been contained.
China will release its June trade data on Tuesday and a batch of other data, including second quarter GDP, on Thursday.
The Chinese yuan stood flat at 7.0068 per dollar in early trade.
The euro traded at US$1.1314 , maintaining its slow uptrend since late last month.
Looming large for the common currency was a planned EU summit on Jul 17 and Jul 18, where leaders need to seek to bridge gaps on long-term budget and economic stimulus plans.
European Council President Charles Michel proposed a smaller joint EU budget for 2021-27 than previously envisaged to placate thrifty countries in the north.
The dollar traded at 106.915 yen, off two-week lows of 106.635 set on Friday.