Dollar Down, Falls Against Yen Over Growing COVID-19 Recovery Concerns

  • Forex News
Dollar Down, Falls Against Yen Over Growing COVID-19 Recovery Concerns
Credit: © Reuters.

By Gina Lee – The dollar was down on Tuesday morning in Asia, recording losses against the safe-haven Japanese yen. Concerns over the most recent COVID-19 outbreaks globally, as well as U.S. manufacturing data released on Monday, led investors to wind back bets on a strong economic recovery from the virus.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.02% to 92.043 by 12:14 AM ET (4:14 AM GMT).

The USD/JPY pair inched down 0.07% to 109.20, the lowest level since late May 2021.

The AUD/USD pair inched up 0.10% to 0.7368 and the NZD/USD pair was up 0.37% to 0.6994.

The USD/CNY pair inched up 0.05% to 6.4656 and the GBP/USD pair edged up 0.12% to 1.3897.

"The market is moderately risk-off with bond yields falling off a bit since European trade yesterday. There is some caution as the Delta variant of COVID-19 is spreading in many places, even in China," Daiwa Securities senior strategist Yukio Ishizuki told Reuters.

The world’s second-largest economy is scrambling to curb its latest COVID-19 outbreak, which is spreading from the coast to inland cities. Other countries in the region, some of which had initial success at curbing the virus, have been struggling to contain their own outbreaks. Japan extended a state of emergency, currently covering Tokyo and Okinawa, to Osaka, Chiba, Kanagawa and Saitama prefectures on Monday.

The state of emergency, effective through Aug. 31, comes as the number of daily cases in Tokyo hit a record.

In Australia, Brisbane extended a lockdown on Monday while the military began patrols in Sydney to enforce the city’s restrictive measures.

The Reserve Bank of Australia will also hand down its policy decision later in the day, in which the central bank is widely expected to reverse an earlier decision to begin asset tapering. Across the Tasman Sea, the Reserve Bank of New Zealand said it would begin consultations to tighten mortgage lending standards amid an inflated housing market.

The Delta variant, described as contagious as chickenpox and far more contagious than the common cold or flu by the U.S. Centers for Disease Control and Prevention (CDC) earlier in the week, also contributed to rising numbers of cases in the U.S.

COVID-19 concerns overrode the progress on the U.S.’ $1 trillion infrastructure investment bill that could be ready for a final vote within the week.

Meanwhile, data released on Monday said the U.S. manufacturing purchasing managers index (PMI) was a better-than-expected 63.4 in July, while the Institute of Supply Management (ISM) manufacturing PMI was a lower-than-expected 59.5. The ISM manufacturing employment index was a better-than-expected 52.9 in July.

"From a historic perspective, a 59.5 manufacturing ISM reading is still a very robust activity reading. Nevertheless, reaction to the data release by the U.S. Treasuries market suggests the market is concerned over 'peak growth' and the potential for more slowdown ahead," National Australia Bank (OTC: NABZY ) senior FX strategist Rodrigo Catril said in a note.

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