Dollar lower on global equity rebound
A return to risk-on mode fueled a rebound in global equity markets and foreign currencies. Traders reacted positively to a combination of China’s injection of liquidity into its banking system and a reassessment of the scope of the coronavirus. Supporting the optimism was yesterday’s turnaround rally in US equities and last night’s Democratic Party debacle in Iowa, which boosted pro-business Trump’s chances in the November presidential election.
February 4, 2020
EUR/USD 1.1048 GBP/USD 1.3031 USD/CAD 1.3284 AUD/USD 0.6720 USD/JPY 109.1700 USD/CNH 6.9942 USD/ILS 3.4509 USD/MXN 18.7112 USD/CHF 0.9692 USD/INR 71.2712
The dollar edged lower as a risk-on mood prevailed overnight. Several factors boosted the optimism, from China’s injection of liquidity to last night’s Democratic Party debacle. Currencies which are related to global trade – CAD, AUD, BRL, CNY – performed well, safe-haven currencies – JPY, CHF, and the US dollar -- underperformed.GBP
After an early sell-off, the UK pound rallied after release of UK Construction PMI, which unexpectedly rose to an eight-month high in January.EUR
The euro dipped slightly with a dearth of Eurozone data that would impact markets.CAD
The Canadian dollar made gains from the risk-on sentiment in the markets, and a technical correction from the recent aggressive sell-off in the loonie.ASIA/PACIFIC
A move higher in Chinese equities triggered a rally in equities worldwide. The USDCNY is back below 7 per dollar, the People’s Bank of China setting the CNY rate slightly better than expected.
The safe-haven Japanese yen weakened by nearly 0.50% , as markets move into risk-on mode.
For more analysis on FX markets or information regarding SVB's FX services:
See all of SVB's latest FX information and commentary at www.svb.com/trends-insights/foreign-exchange-advisory