Dollar rebounds broadly on short covering: March 31, 2020
Market Review - 30/03/2020 23:46GMT
Dollar rebounds broadly on short covering
The greenback snapped its recent losing streak and ended broadly higher on Monday due to short-covering as global central banks and governments launched monetary and fiscal measures to battle the economic fallout caused by the coronavirus pandemic.
On the data front, Reuters reported contracts to buy previously owned homes rose for the second straight month in February, the National Association of Realtors said on Monday. The NAR's pending home sales index increased to a reading of 111.5, up 2.4% from the prior month. January's index was revised slightly to 108.9 from 108.8. Economists polled by Reuters had forecast pending home sales falling 1.0% last month.
Versus the Japanese yen, although dollar initially fell from 107.96 in New Zealand to an 11-day low of 107.13 in Asian morning due to steep fall in U.S. Treasury yields and weakness in Asian equities, price quickly erased its losses and rebounded to 108.24 in European morning on usd's strength before retreating to 107.50 but only to later to climb to session highs of 108.29 shortly after New York open due to firm gains in U.S. stocks and then swung broadly sideways in directionless New York trading.
Despite recovering to 1.1143 in New Zealand, renewed selling emerged and knocked the single currency down to 1.1062 at European open. The pair then ratcheted lower to session lows of 1.1011 in New York morning due partly to downbeat euro zone data as well as usd's strength before moving sideways and last traded at 1.1046 near the close. Reuters reported euro zone sentiment suffered its steepest ever monthly decline in March as the coronavirus led to declining confidence among consumers and all sectors of the economy, in many cases even before crippling lockdowns were imposed.
Economic sentiment in the 19 countries sharing the euro fell to 94.5 points in March from 103.4 in February, sharply breaking an upward trend in place from November, European Commission survey data showed on Monday. The decline was the steepest monthly drop since records began in 1985. The overall figure, the lowest since September 2013, was slightly above the average 93.0 average forecast in a Reuters poll of economists.
The British pound went through a roller-coaster ride. Although cable initially retreated to 1.2394 in New Zealand on profit-taking, price rebounded to 1.2466 at Asian open before falling to session lows of 1.2318 in European morning in delayed reaction to Fitch's downgrade of U.K.'s rating due to coroanvirus debt surge. However, the pair then staged a strong recovery to 1.2441 but only to weaken to 1.2373 in New York morning and then swung broadly sideways.
Reuters reported ratings agency Fitch downgraded UK's sovereign rating to 'AA-' from 'AA' on Friday, blaming a significant weakening of the country's public finances due to the coronavirus outbreak and a fiscal loosening stance. The rating change comes as Prime Minister Boris Johnson tested positive for the coronavirus, which has infected more than 14,500 and killed 759 as of Thursday afternoon in UK, up by nearly a third in 24 hours. The agency maintained the country's outlook at 'negative'.
In other news, Reuters reported the Bank of England said on Monday it would extend an emergency liquidity measure, the three-month Contingent Term Repo Facility (CTRF), to run until the end of April and it would also hold a one-month CTRF operation each week until May 1. The BoE reactivated the facility last week as part of its attempts to keep financial markets running smoothly during the coronavirus crisis. "The Bank will continue to monitor market conditions carefully and the operation of the CTRF remains under review," it said in a statement on Monday. "The Bank stands ready to take additional action if necessary."
Data to be released on Tuesday :
New Zealand building permits, NBNZ business outlook, NBNZ own activity, UK GfK consumer confidence, GDP, current account, Japan unemployment rate, industrial output, construction orders, housing starts, China NBS non-manufacturing PMI, NBS manufacturing PMI, Germany import prices, unemployment change, unemployment rate, Swiss retail sales, France consumer spending, CPI (EU norm), CPI, producer prices, Italy consumer price index, CPI (EU norm), producer prices, EU HICP, core HICP, Canada GDP,producer prices, and U.S. redbook, CS home price, Chicago PMI, consumer confidence.
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