Dollar wobbles as PMI data fuels hopes for global recovery

SINGAPORE (Reuters) – The dollar was under pressure on Wednesday, after optimistic data in Europe boosted the euro and helped fuel hopes for a global economic recovery, bolstering investors’ appetite for riskier currencies.

FILE PHOTO: US dollar bills are seen in this photograph taken on February 12, 2018. REUTERS / Jose Luis Gonzalez / Illustration / File Photo

IHS Markit’s Euro Composite Flash Buying Managers Index, a broad indicator of economic activity, beat expectations with a rebound to 47.5 from May 31.9.

That is still below the 50 mark that separates growth from contraction, but the strong rally, along with optimistic data in Britain and the United States, supported the feeling that growth is returning at a rapid pace.

It also seemed enough for now to offset concerns about the resurgence of coronavirus cases in the US. USA And attract bets, which are reflected in an increase in the price of gold, on the general weakness of the dollar.

The euro is heading for its best month against the dollar since October, and trade rebounded to a one-week high overnight, the latest buy of $ 1.1321.

The risk-sensitive Australian dollar led the morning moves, with a 0.3% gain at $ 0.6952, pushing it towards the upper end of the range it has held for a couple of weeks. [AUD/]

The New Zealand dollar fell slightly on the day to $ 0.6477 after the country’s central bank said the balance of economic risks continues to decline and is prepared to use additional monetary tools as needed.

The RBNZ kept interest rates on hold, as expected.

“We are still seeing the opposing forces of economic recovery, on the one hand, and concerns about the spread of the virus, on the other hand,” said Kim Mundy, FX analyst at the Commonwealth Bank of Australia in Sydney.

“But overnight Eurozone PMIs rose, UK PMIs rose, and US PMIs rose. So economic history, we’re seeing recovery, is helping to shore up the commodity currencies. ”

The mood raised the British pound a fraction higher to $ 1.2524 and helped scrape a three-month low against the euro.

The yen held overnight gains at 106.46 per dollar, reflecting caution and also corporate flows as investment giant SoftBank began a sale of $ 21 billion of its stake in US telecommunications company T-Mobile.

The movements occurred despite an increase in coronavirus cases.

For the second week in a row, Texas, Arizona, and Nevada set records for their coronavirus outbreaks, and 10 other states, from Florida to California, were dealing with increased infections.

Australia has reported its first death from COVID-19 in more than a month, amid an increase in new cases in the state of Victoria, where some collection restrictions have been re-imposed.

Investors so far are betting that this will not cause further blockages or affect the global economic recovery.

“We hope that in the next two weeks, as we become more clear about this, state governors will be in a better position to decide how to proceed,” said Tom Porcelli, chief economist at RBC Capital Markets, on the cases in the United States.

“For now, we have not seen any negative changes in consumer behavior as a result.”

Report by Tom Westbrook; Editing by Ana Nicolaci da Costa

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