The dollar advanced on Friday, posting sharp gains against the safe-haven yen as stock markets recovered globally and investors cheered efforts made by governments and policymakers to address the economic fallout from the coronavirus outbreak.
The greenback extended gains against several currencies after a blowout in swap spreads on Thursday signaled that investors want dollars. While those spreads came in on Friday, the dollar held strong. But market participants said signs of dollar funding stress persist and policymakers probably need to do more.
"Underlying concerns regarding the economic fallout from the coronavirus on credit markets broadly remain," said Shaun Osborne, chief FX strategist, at Scotiabank in Toronto. "It may be tempting to look for signs of a low in global stocks but with the underlying issue - the coronavirus - still unchecked, we think that is premature at this point," he added.
In mid-morning trading, the dollar gained 2.2% against the yen to 106.94. It also rallied versus another safe haven, the Swiss franc, rising 0.9% to 0.9508 franc. Against a basket of currencies, the dollar rose 0.6% to 98.085. The euro, meanwhile, nursed losses despite European Central Bank policymakers trying to reassure markets. European assets sold off on Thursday after investors were underwhelmed by the bank's stimulus measures. It was last down 0.5% at $1.1125. The pound also weakened 0.3% against the dollar to$1.2510.
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