Hopes for virus treatment, U.S. reopening snuff out dollar rally


U.S. dollar notes are seen in this picture illustration
FILE PHOTO: U.S. dollar notes are seen in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration

April 17, 2020

By Tom Westbrook

SINGAPORE (Reuters) – The dollar dipped on Friday as a news report on signs of success in a COVID-19 treatment drug trial as well as early plans to re-open the U.S. economy drove fresh optimism and risk appetite.

Even the first drop in Chinese economic growth since quarterly records began nearly three decades ago did not dent the mood as investors sought silver linings in indications of a rebound in industrial production.

The Australian and New Zealand dollars led gains, with both rising about 1% before paring a little, while the pound and euro also rose to recoup some of the past two days’ losses.

The moves toppled the dollar, which has closely tracked risk sentiment through the coronavirus crisis, from a week high. The greenback is headed for its steadiest week in almost two months.

“It’s this divided feeling between wanting to worry about the economic freeze and the hope that things might be re-starting quite soon,” said Moh Siong Sim, currency analyst at the Bank of Singapore.

“We’re stuck in that limbo zone, but it does seem that the infection rate may have hit a peak at a global level … and if we find a cure, then there’s a cure for the economy as well.”

Optimism on Friday was sparked by hopes for a successful treatment of COVID-19, the respiratory disease caused by the coronavirus, and was carried through the Asian day in spite of dismal economic news.

Medical news website STAT, citing a recorded discussion between doctors involved in a clinical trial, said most of 125 patients given Gilead’s <GILD.O> remdesivir drug at a hospital in Chicago had recovered and been discharged.

Gilead said anecdotal reports do not provide the data needed to determine the safety or efficacy of the experimental drug as a treatment for COVID-19 and that it expects more data will be available at the end of the month.

“The market is looking for good news – grasping and hoping and praying,” said Imre Speizer, FX analyst at Westpac. “People just want to get on the positive bandwagon.”

The dollar last sat at $1.0874 per euro <EUR=> and $1.2500 per pound <GDP=> and firmed to 107.70 yen <JPY=>.

The Aussie <AUD=D3> last bought $0.6367 and the kiwi <NZD=D3> at $0.6019. Against a basket of currencies <=USD> the U.S. dollar was 0.1% softer but set for a weekly gain of 0.3%, its smallest weekly move since February.

‘GRADUALLY RECOVERING’

Adding to the good news was a surprise jump in Singapore non-oil exports, driven by gold and pharmaceuticals, and tentative progress toward a re-opening of the world’s biggest economy – the United States.

U.S. President Donald Trump has announced guidelines for a return to work, a three-stage process dependent on robust virus testing and subject to states’ discretion.

Nevertheless, the crisis has already turned some 22 million Americans out of work and hammered global growth.

China’s economy shrank 6.8% in the first quarter, the first reversal since at least 1992, as the coronavirus outbreak paralysed production and spending.

Investors were encouraged because that was not too much worse than they had feared, and because of a less-than-expected 1.1% drop in industrial output, though big uncertainties remain.

“It shows the economy is gradually recovering from the very worst,” said Nathan Chow, senior economist at DBS in Hong Kong.

“But I think in the second quarter we will see at most a stabilisation, not a rebound, because cases are still rising for most of China’s trading partners, which will dampen orders going forward. Based on this first-quarter number, I would say the whole year GDP growth would be something around 2%.”

(Reporting by Tom Westbrook; Editing by Sam Holmes and Himani Sarkar)





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