The euro remains high as investors bet that the recovery hinders the dollar, stocks rise

SINGAPORE / NEW YORK (Reuters) – The euro remained at its highest point in 18 months, silver soared and commodities advanced on Wednesday as hopes of economic recovery pushed up bets on a recovery in global demand and the fall of the US dollar.

Stock markets in Asia rose further, except in Australia, where an increase in coronavirus infections put pressure on banking and travel stocks and the benchmark index fell 1%. S&P 500 ESc1 stock futures advanced 0.4% in line with the relatively positive mood.

The recovery of the EUR = EBS euro was sparked by European Union leaders who agreed to a rescue plan across the region, a big step towards recovery and a stronger union.

The common currency rose to $ 1.1543, its best level since January 2019, as investors bet that an economic rally would benefit currencies in addition to the dollar as world exports rebound and trade improves.

“Overall, sentiments are improving,” said Vishnu Varathan, chief financial officer at Mizuho Bank in Singapore.

“That afterburner was given to the euro, and it is also true for the Australian … it went bankrupt once the dollar began to crumble.”

The Australian dollar AUD = D3 hit a more than a year high of $ 0.7144 on Wednesday and was bolstered by strong national retail sales data.

Bellwether HGc3 CMCU3’s three-month copper futures were close to two-year peaks and iron ore prices opened further, avoiding a surge in production in Brazil and a cautious outlook from global miner BHP.

Falling yields on real bonds have added to the shine of precious metals, while industrial demand has ripped silver. Spot XAG = prices for metal, used in solar systems, rose 5% on Wednesday and rose 15% during the week.

Gold XAU = also hit a new nine-year high of $ 1,865.35.

“The silver-gold price ratio is still well below the long-term average,” said Commonwealth Bank of Australia commodity analyst Vivek Dhar.

“We believe that means that a sustained recovery in silver can continue, particularly when demand expectations and supply concerns add to the mix.”

CLIFF CONCERNS

Elsewhere there was a cover on optimism. The spread of the coronavirus in the United States and other hotspots such as India, Latin America, Tokyo, and Melbourne accelerated and signs abound that economic recovery is far from assured in the short term.

The activity of the Japanese factory contracted for the 15th consecutive month in July.

Economists expect trade-sensitive South Korea to post its worst economic contraction in 20 years when second-quarter GDP data is released on Thursday.

MSCI’s broader Asia-Pacific index of stocks outside Japan .MIAPJ0000PUS rose 0.2% to stand just below a five-month high reached on Tuesday. Japan’s Nikkei .N225 was down 0.2%.

The United States also reported more than 1,000 deaths from COVID-19 on Tuesday, the first time the grim milestone was passed since June, and President Donald Trump warned that things are likely to get worse before they get better.

Republicans and Democrats disagree about the size of the next tax relief package as the “fiscal cliff” end-of-month deadline for extending unemployment insurance.

“It remains to be seen whether Republicans and Democrats have the same determination shown by EU leaders to find a middle ground next week,” DBS analysts in Singapore said in a note.

“This concern was evident in US equities.”

On Wall Street overnight, the benchmark S&P 500 .SPX hit positive territory during the year so far, but struggled to advance and closed 0.16% higher.

The Dow .DJI was up 0.6%, and the Nasdaq .IXIC was down 0.8%, as investors sold off a spectacular technology recovery that has increased the titans of Apple, Amazon, Microsoft and Alphabet so much that their value of Market beats that of all Japanese stocks combined.

Oil prices remain within range, but they held on to most of their gains overnight. Brent LCOc1 futures fell 0.5% to $ 44.12 a barrel and US crude fell 0.5% to $ 41.70 a barrel.